YESTERDAY, DDT reported, “Board Blunderland – Amends non existing entries”. We deeply regret the usage of such words like blunder for an august body like the CBEC – we never believed they are capable of something far more than blunder. Blunder was a gross understatement! Yesterday we reported that they amended Notification No. 1/2006 – Service Tax, wherein they amended a non existent entry - Sl. No 6, which they had omitted in 2008. They made quick damage control exercises and came up with an amendment to Notification No. 13/2008, which causes more damage than the original blunder.

With this amendment, there is a possibility of the tax payers claiming exemption from 75% of the value for all the services falling under sub-clauses (zn) (port service)   or (zzl) (other port service) or (zzm) (Air port service). There is every possibility of the benefit being extended by the appellate forums because of the wording of the Notification.

By Notification No. 40/2010 - Service Tax Dated: June 28 2010, they amended Sl. No. 6 of the Notification No. 1/2006, without realising that Sl. No. 6 was omitted in 2008. Now they have tried to rectify the damage by amending Notification No. 13/2008, but have landed in more blunderland .

The whole confusion started with the amendment of the definition of port services. Now any service rendered in a port would be port services. Thus even if the 'rent a cab service' is provided within a port, it would become port service. Apparently the Government wanted to give the abatement allowed to several services, even if provided within the port. So they amended Notification No. 1/2006 to give the same rates of abatements to the services entitled for abatements. In the process they also amended the non-existing Sl. No. 6, which once upon a time was in relation to abatement on GTA Service. Having realised their blunder, instead of correcting the mistake they made in Notification No. 1/2006, they hastily amended Notification No. 13/2008.

Notification No. 13/2008,

exempts the taxable service provided by a goods transport agency to any person in relation to transport of goods by road in a goods carriage, referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, from so much of the service tax leviable thereon under section 66 of the Finance Act, as is in excess of the amount of service tax calculated on a value equivalent to twenty five per cent. of the gross amount charged by the goods transport agency for providing the said taxable service.

After the amendment, this notification will read as,

exempts the taxable service provided by a goods transport agency to any person in relation to transport of goods by road in a goods carriage, referred to in sub-clause (zzp) or (zn) or (zzl) or (zzm) of clause (105) of section 65 of the Finance Act, from so much of the service tax leviable thereon under section 66 of the Finance Act, as is in excess of the amount of service tax calculated on a value equivalent to twenty five per cent. of the gross amount charged by the goods transport agency for providing the said taxable service.

What they mean is that GTA Service in the port will get an abatement of 75%. But then what happens to the amendment they made to Sl. No. 6 of Notification No.1 /2006? They are not ready to correct that mistake - yet!

There is always an easy solution to every human problem - neat, plausible, and wrong.

Notification No. 43/2010-Service Tax Dated: June 30 2010

Exempted from Construction Service, but what about Works Contract Service?

IN yesterday's DDT, we reported a number of service tax notifications issued on 28th June 2010. Of these, two notifications,  38/2010 and 42/2010 provided exemption from payment of service tax in respect of commercial or industrial construction services referred to in sub-clause (zzq) provided within the port/other port or Air port respectively.

It seems while exempting the commercial construction referred to in sub-clause (zzq), the taxability of this service undertaken as Works Contract Service referred to in sub-clause (zzzza) was totally forgotten. Needless to say the construction services undertaken within the port/other port airport may also merit classification under Works Contract and the whole purpose of issuing exemption Notifications,  38/2010 and 42/2010 would be defeated if Works Contract Service referred to in sub-clause (zzzza) is not included in these exemptions.

Similarly, in a recent clarification issued by the Board vide letter dated 24th May 2010, on taxability of construction of residential houses by National Building Construction Corporation Limited (NBCC) for Central Government officers, it was clarified that service tax is not attracted under Construction of Complex Service. However, no mention was made about taxability under Works Contract Service.

Similarly Notification No. 28/2010 - Service Tax, exempts taxable  service of construction of complex when provided to Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana . Here also there is no exemption for Works Contract Service.

May be the Board should check twice before issuing Notifications/Clarifications on such services which are also executed as Works Contracts.

Outdoor Catering in Ports - No abatement?

NOTIFICATION 1/2006 ST has been amended vide Notification 40/2010 ST dated 28th June 2010 to provide abatement for various services like rent-a-cab, erection commissioning,  construction services etc., provided in ports as port services. However no amendment has been made to entry at Sl No 8 (catering services referred under sub-clause (zzt). So, while catering services outside the ports get abatement of 50%, such service rendered inside the ports do not get any abatement.

Further, while the construction service  referred to under (zzq) provided in airports has been completely exempted from service tax vide Notification 42/2010 ST, where is the necessity to provide abatement to these services rendered in ports by amending  Sl Nos 7 and 7(a) in Notification 1/2006 ST?

CENVAT Credit cannot be used for payment of Clean Energy Cess

GOVERNMENT has amended the CENVAT Credit Rules to stipulate that, “the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Clean Energy Cess leviable under section 83 of the Finance Act, 2010 (14 of 2010)”

Notification No.  26/ 2010-Central Excise (N.T.) Dated: June 29, 2010

Classification of Polyester Staple Fibre manufactured out of PET scrap and waste bottles. - Section 37 B Order

TO ensure uniformity in the manner of classification of the Polyester Staple Fibre obtained from PET scrap and waste bottles Board has clarified in a Section 37B Order that this product is correctly classifiable under heading 55032000.

CBEC Circular No.  929 / 19 /2010- CX Dated: June 29 2010

Jurisprudentiol – Friday's cases

Service Tax/Central Excise

Outdoor Catering Service, not input service, not eligible for credit - When biscuits are not eligible for credit, how can activity of supplying biscuits be eligible? - Sensational Judgement from CESTAT

THE very foundation of CENVAT Credit on input services has been shaken up. In a combined order covering thirteen appeals, the CESTAT single Member over-ruled the Larger Bench decision and held that CENVAT Credit cannot be allowed on catering service.

Income Tax

Whether assessee, running two separate undertakings, is entitled to setoff depreciation of one undertaking, whose income is eligible for deduction u/s 80IA , with the business income of other undertaking

ASSESSEE running two units - one is engaged in the manufacturing of wires (unit 1) and is not eligible for Sec 80IA deduction. The other one is engaged in generation of power from wind mill (Unit 2) and is eligible for deduction u/s 80IA . Assessee earned income from unit 1 and setoff the same with the unabsorbed depreciation of the unit-2. AO disallowed it on the ground that the provisions of sub-section 5 of 80IA divorced the income and losses of eligible units from non-eligible units. CIT (A) affirmed the order of the AO.

Service Tax

Consulting Engineer - a duty is cast on Tribunal to consider grounds urged by parties and same has to be adjudicated: High Court

SECTION 35D of the Central Excise Act contemplates the procedure to be followed by the Tribunal whereunder the provisions of the Customs Act under Section 129(C)(1)(2)(5) and (6) have been made applicable whereunder a duty is cast on the Tribunal to consider grounds urged by the parties and same has to be adjudicated. Tribunal committed an error in not considering the ground urged by the appellant before it and as such the order of the Tribunal cannot be sustained and accordingly it is set aside.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

Mail your comments to vijaywrite@taxindiaonline.com