TIOL-DDT 2255
19.12.2013
Thursday

WORKS contract service in respect of canals has become taxable w.e.f. 01.06.2007. However, service tax levy on Works contract service in respect of canals other than those primarily used for the purposes of commerce or Industry was exempt from 23.10.2009 vide notification No.41/09-Service Tax dated 23.10.2009 and 25/2012-ST dated 20th June, 2012.

Then what about the period prior to 23.10.2009? While reporting Notification No. 41/2009 in DDT 1224 - 27.10.2009, DDT observed, "is this notification clarificatory in nature and thereby applicable retrospectively because it seeks to address a long pending issue or is it only to be read prospectively? Now that there is an exemption from 23rd October, the auditors will have field day and keep the consultants busy by raising demands for the period prior to 23rd October 2009 because there was no exemption."

Well, this is what exactly happened - four years later. Board in a letter to all the Commissioners in May 2013 observed, " However, for the said services provided during period between 01.06.2007 to 22.10.2009 service tax is leviable."

It appears the Government had contemplated issue of Section 11C Notification and called for the data in the month of May 2013. A letter was issued to all the Commissioners seeking data on the total number of service providers, service tax paid for the period from 01.06.2007 to 22.10.2009 and the details of Show Cause Notices issued. Why do they need these figures if the activity was taxable?

However, in spite of lapse of seven months, no Notification has seen the light of the day. Does this mean the idea has been shelved?

This issue is slightly complicated and DDT had covered it extensively in DDT 1204 25.09.2009, DDT 1212 09.10.2009and DDT 1224 - 27.10.2009. The Board had not canalised its thoughts properly on this issue right from the beginning.

DDT 2001 - 12.12.2012 had actually suggested that Government should issue a Section 11C notification for canals and water projects.

Now, was it the intention of the Government to tax construction of canals during the period 01.06.2007 to 22.10.2009 and exempt it later? What was the logic in taxing it for a short period?

TRU letter F. No 354/74/2013-TRU dated May 14, 2013

I-T - Mistrust - Charitable Trusts - irregular exemption- CAG Lambasts

THE CAG, in its recent report tabled in Parliament observed:-

Twenty two Trusts accumulated surpluses of Rs. 819 crore ranging from 35.7 to 84.8 percent of their total income. These surpluses were used for creating fixed assets for earning more profit or transferred to other Trusts rather than charitable purpose to avoid tax.

ITD allowed irregular exemptions to Jamshedji Tata Trust and Navajbai Ratan Tata Trust who invested Rs. 3,139 crore in prohibited modes arising from accumulations of capital gains which involved tax effect of Rs. 1066.95 crore.

In 25 cases, Trusts transferred accumulations to other Trusts treating as application of income which resulted in short levy of tax of Rs. 32.52 crore. (3.14 Explanation to sub section (2) of section 11 prohibits donation to other Trusts out of accumulated funds.)

Four Trusts disbursed interest free loan of Rs. 14.85 crore to escape taxation involving short levy of tax of Rs. 6.23 crore.

ITD allowed irregular exemptions to three Trusts who earned substantial income by accepting capitation fee in addition to other prescribed fee resulted in short levy of tax of 8.88 crore.

ITD allowed irregular exemptions of TV subsidy received from BCCI to four Cricket Associations engaged in commercial activity which resulted in non levy tax effect of 37.23 crore.

ITD allowed irregular exemptions to 30 Trusts involving tax effect of 59.61 crore where voluntary contributions, received without specific directions, were taken to corpus fund instead of treating as income.

ITD allowed irregular exemptions to 48 Trusts involving tax effect of 28.01 crore where trusts were carrying out commercial activities and did not maintain separate books of accounts.

ITD allowed exemption on accumulated amounts to 11 Trusts involving tax effect of 99.63 crore though Trusts lost charitable character.

From CAG's Report No. 20 of 2013.

CBEC Cadre Review Notified

IN yesterday's DDT 2254, it was reported -

CBEC  has constituted several committees to ensure that the cadre review is implemented smoothly and quickly. There is a Core Committee headed by the DG,HRD and several other committees such as Committees for DPC, Operational Issues and re-organisation, Recruitment, Technical matters, infrastructure.

They plan to complete the entire cadre review work in six months. The Cadre Review in CBEC is yet to be notified. Cadre Review in CBDT was notified in May 2013 and is yet to be implemented.

CBEC is getting about 18000 additional posts - can they really absorb this kind of work force?

By the close of the day, the competent authority had sanctioned the creation of 18067 posts in various grades under the Central Board of Excise & Customs with immediate effect. The total sanctioned staff strength now leapfrogs from 66808 to 84875.

There will be 14 new posts of Principal Chief Commissioner at the Apex Scale of Rs. 80,000 and 38 posts of Chief Commissioner in the scale of 75500-80000 - HAG+. There will be 100 Principal Commissioners in the HAG scale of 67000-79000.

They will have 2118 new posts of temporary Assistant Commissioners operational for five years. This means some 2118 Superintendents will get promotion and these posts will wither away in five years and will not be available for the subsequent batch of officers.

It is hoped that the committees and the sub-committees, if any, constituted to ensure that the cadre review is implemented smoothly and quickly stick to the time frame of six months so that at least some of them get that elusive promotion before they retire.

F.No. A/11019/08/2013-Ad.IV dated December 18, 2013

Appeal dismissed on ground that no clearance was obtained from CoD - Revenue seeking restoration - from the letter it is clear that CBEC had not decided to pursue matter and, therefore, matter was not listed before CoD at all - question of restoration of appeal does not arise at all - ROA not maintainable: CESTAT

REVENUE has filed an application for restoration of the appeal dismissed by the Tribunal on 29/07/2005 on the ground that no clearance was obtained from the Committee on Disputes (COD).

When the matter came up earlier, the department was directed to adduce evidence to the effect that they have obtained the clearance from COD.

To this direction, the Revenue submitted that no clearance is required in view of the Supreme Court decision in Electronics Corporation of India Ltd. (2011-TIOL-18-SC-CX-CB).

Be that as it may, a letter F.No. 390/143/99-JC dated 13/09/2013 was produced by the Revenue representative during the hearing held recently and which reads -

"Sub: Civil Appeal proposal in the case of M/s International Tobacco Co. (CESTAT Order no. 105/07 dated 21/03/2007)

Sir,

Please refer to your office letter F.No. 29/19/99/CX/R dated 30/08/2013. As desired, a copy of the letter forwarding the case of HPCL to the Committee on Disputes (COD) is enclosed for necessary action at your end. As informed earlier, the case was never listed for consideration of the COD as the Board had decided not to pursue appeal in the matter."

The Bench, therefore, observed -

"4. Inasmuch as the Board has decided not to pursue the matter and the same was also not listed before the COD for clearance at the relevant time and hence not pending, the question of restoration of appeal does not arise at all. Accordingly, we dismiss the application for ROA as not maintainable."

See 2013-TIOL-1884 -CESTAT-MUM

Curbs on Gold Import would incentivise smuggling - RBI Guv

RESERVE bank of India Governor yesterday said, "I would have been happier if we had the current account deficit (CAD) that we have without significant curbs on anything, including gold. I think that is our aim. I think, we should aim to have a sustainable CAD without any distortions, like removing incentives for smuggling of gold."

The Governor added, "My discussions with government officials suggest that they are very firm on achieving it (fiscal deficit target). That will mean, given where we are, there will be a certain amount of expenditure reduction in the fourth quarter. That will have some adverse growth effect, of course. We expect expenditure reduction in the fourth quarter. My reading is there is always a certain amount of rollover."

Very optimistic Governor, but Revenue realisation is going to be far short of target.

No LTC to employee facing disciplinary probe

"DURING the pendency of disciplinary proceedings, the government servant shall not be allowed the next two or more sets of LTC in addition to the sets already withheld," Minister of State for Personnel, V Narayanasamy told Lok Sabha in a written reply yesterday.

Undervaluing a TON of human hair imported from India

CUSTOMS at Sao Paulo's international airport recently impounded a cargo containing a ton of human hair from India.

The importer had declared the cargo - long pony tails held together with elastic bands and packed into boxes valued at just USD15,000 (4,600 euros). However, during inspection it turned out that the true value is USD 400,000.

The Customs spokesman urged consumers of this type of product to always ensure that the supplier respects National Sanitary Surveillance Agency requirements on sterilizing and disinfecting imported hair.

Even our hair is undervalued these days!

By the way, from which port did the hair leave the shores of India?

Jurisprudentiol - Friday's cases

Service Tax

Personnel supplied are expected to work as security guard and ensure security of articles and equipment in the building and offices - service provided by assessee is that of security agency and not Manpower supply - Wages cannot be called reimbursable expenses as these are not incidental but main element in providing service - Appeal rejected: CESTAT

THE assessee is a proprietary concern providing security guards to M/s.BSNL for security of their immovable and movable properties. As per the terms of agreement between BSNL and the assessee, BSNL was to pay the salary of the guards + 10% as the service charges to the appellants. The entire amount was billed by the assessee and was paid by BSNL to the assessee. From the said amount, the assessee was paying the salary to the security guards and retaining 10% service charges as their profit. Assessee was paying service tax on the service charges alone.

Income Tax

Whether share application form is unimpeachable document, and same can be considered for cross-verification of transaction of share transfer -NO: HC

THE assessee, a company, had filed return on 31.10.2001 declaring total income of Rs. 1,42,508/-. Its assessment was completed u/s 143(3) at income of Rs. 8,90,160/-. On giving appeal effect, the revised income stood assessed at Rs.8,64,414/-. As per the Investigation Wing, Assessee was identified as one of the beneficiaries who had received bogus entries. Notice u/s 148 was issued, in response to which, assessee filed a letter stating that return originally filed may be treated as return in response to the notice u/s 148. Notice u/s 143(2) & 142(1) was issued and assessee was required to furnish information in respect of persons who had been allotted shares between the period 31.03.2001 and 31.03.2007.

The issue before the High Court is - Whether share application form is unimpeachable document, and the same can be considered for cross-verification of the transaction of share transfer. And the verdict goes against the assessee.

Central Excise

Rule 8(3A) of CER - It is a well settled principle of law that no provision of law should be read in such manner so as to make it ineffective or otiose - since appellant has defaulted in payment of duty for period more than 30 days, appellant is not entitled to utilize CENVAT Credit for payment of duty liability - Pre-deposit ordered of Rs.7.37 Crores: CESTAT

DURING the period from April 2011 to March 2012 the appellant consistently defaulted in payment of Central Excise duty. The amount of defaulted duty during this period amounted to Rs.1,44,83,942/-. Therefore, a SCN was issued to the appellant on 16/05/2012 invoking the provisions of Rule 8(3A) of the CER, 2002 wherein it was proposed to deny the benefit of CENVAT Credit for payment of duty inasmuch as the default persisted more than 30 days.

Accordingly, a demand of duty of Rs.8,88,02,216/- was confirmed against the appellant for the period June 2011 to March 2012 which was appropriated from the payments made subsequently by the appellant. CENVAT Credit of Rs.7,36,74,043/ was sought to be denied during the impugned period and the adjudicating authority confirmed this duty demand. However, he allowed the appellant to take credit of the same in case this amount of Rs.7,36,64,043/- is paid in cash. In addition, interest is demanded and a penalty of Rs.35 lakhs was imposed under Rule 25 of CER, 2002.

See our Columns tomorrow for the judgements

Until tomorrow with more DDT

Have a nice day.

Mail your comments to vijaywrite@taxindiaonline.com