Recently we carried a judgement of the AP High Court that VAT cannot be collected from both the main contractor and sub contractor. We also carried a CESTAT order that Service Tax cannot be collected from the sub consultant. Board had recently given a clarification on a similar issue.

The Indian Railway Catering and Tourism Corporation Ltd asked the Board for a clarification and they stated that

++ In respect of catering services provided in Shatabdi / Rajdhani trains, IRCTC licensed private contractors (known as sub-licensee) provide catering services on board the trains and the private contractor pays service tax under outdoor catering service for the catering services provided.

++ The entire amount billed to IRCTC towards cost of food supplied to the passengers by the private contractor is transferred by Railways to IRCTC which in turns transfers it to the private contractor who is providing services.

++ IRCTC does not retain any amount and service tax is paid by the private contractor on the total amount billed by him to IRCTC.

++ IRCTC recovers 15% of the billed amount from the private contractor and pays service tax on the said amount under Business Auxiliary Service.

Board clarifies -

++ IRCTC has been formed to manage the catering and hospitality services in trains and licensed to provide and distribute meals and services to the passengers on board the trains.

++ Outdoor caterer is defined under section 65(76a) as a caterer engaged in providing services in connection with catering at a place other than his own and caterer is defined under section 65(24) as any person who supplies, either directly or indirectly, any food or beverages.

++ In view of the definition of outdoor catering service under section 65(105) (zzt), outdoor caterer under section 65(76a) and caterer under section 65(24) and the facts stated, the service provided by IRCTC appears to be classifiable under outdoor catering service.

++ If any further clarification on the matter is required, the jurisdictional officers may be contacted.

As if jurisdictional officers can clarify what even the Board could not! Now as per the Board clarification, IRCTC is required to pay Service Tax for the catering in the trains, even though it does not actually provide even a glass of water. Then is the contractor who actually supplies the food also required to pay Service Tax? That too for the same taxable event?. Please recall the AP High Court judgement in L&T. Board does not clarify this. We will bring you more analysis on this issue soon.

F. No. 332/38/2006-TRU dated the 1st August, 2006.

Agricultural tractor on the main road – doesn’t lose status - CBEC

Agricultural tractors were exempted from duty in order to encourage farm sector. But what happens if a tractor strays away from the farm and into the main road? It has to be careful to avoid a Central Excise Superintendent! This is not that easy with so many Superintendents swarming all over the place. The tractor accosting the first Central Excise officer on the road is likely to be seized for straying on to the road.

Board circular states that “Representations have been received in the Board that certain field formations are proposing to charge excise duty on agricultural tractors on the ground that besides agricultural work, these tractors are used for haulage of farm products, fertilizers, etc. thereby qualifying as “road tractors for semi-trailers” attracting Central Excise duty @ 16%.”

++ “Road tractors for semi-trailers” attract Central Excise duty at the rate of 16%, if the engine capacity is more than 1800 cc.

++ Tractors falling under Chapter heading 8701 were exempted from excise duty in Budget 2004-05 with the intention to give exemption to agricultural tractors, in order to encourage farm sector.

++ A tractor primarily designed and meant for agriculture purposes can also be incidentally used to take goods to the nearest market.

++ But that is an incidental use, and such tractors are not primarily designed to haul trailers.

++ Therefore, incidental use of hauling trailers will not put such tractors in dutiable category. Therefore primary use of tractor should be the deciding factor.

So the good Board has advised the field to be so informed.

CIRCULAR NO. 838/15/2006-CX., Dated: November 16, 2006

Exemption to parts of tractors – Board clarifies

Tractors are exempted, what about parts? As per Notification No. 6/2002-CE and 6/2006-Central Excise,

Parts, used within the factory of production for manufacture of goods of heading 8701 parts, falling under any chapter, used within the factory of production for manufacture of goods of heading 8701 are exempted.

Some doubts have been expressed as to whether parts falling under Chapters other than 87, when used within the factory of production for manufacture of goods of heading 8701 are eligible for the exemption.

Board clarifies that

++ goods falling under any Chapter, so long as they are parts of goods of heading 8701, will be covered by the said notifications subject to fulfillment of other conditions prescribed in the said notifications.

++ For example, IC Engines, when used within the factory of production for manufacture of tractors falling under heading 8701, will be classifiable under Chapter 84, and will be covered by the said notifications subject to fulfillment of other conditions.

CIRCULAR NO. 839/16/2006-CX., Dated: November 16, 2006

Facilities to NRIs/PIO and Foreign Nationals - Liberalisation

As per Regulation 4 of Foreign Exchange Management (Remittance of Assets) Regulations, 2000 notified vide Notification No. FEMA.13/2000-RB dated 3rd May 2000 and as amended from time to time, and A. P. (DIR Series) Circular No. 67 dated January 13, 2003, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO) are allowed to remit up to USD one million per calendar year for any bonafide purpose out of the balances in their Non-Resident Ordinary (NRO) accounts. The balance in the NRO accounts may also include the sale proceeds of immoveable property acquired by the non-resident out of her/his resources in India, or sale proceeds of property received by way of inheritance or gift. The remittance of sale proceeds of the immoveable property is at present subject to a lock-in period of 10 years.

With a view to further liberalise the procedure and provide greater flexibility, the lock-in period of 10 years for remittance of sale proceeds of immovable property has been dispensed with.

A.P. (DIR Series) CIRCULAR NO. 12/RBI., Dated: November 16, 2006

As it rarely happens that a man is fit to plead his own cause, lawyers are a class of the community, who, by study and experience, have acquired the art and power of arranging evidence, and of applying to the points at issue what the law has settled. A lawyer is to do for his client all that his client might fairly do for himself, if he could.

(Samuel Johnson (1709-1784)

Until Tomorrow with more DDT

Have a nice day.

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