By G Prabhakara Sastry, Advocate

THE levy of Service Tax is there. But the government does not appear to be clear on the line of action - hard, soft or both/neither.  The Government is spending huge money on advertisements asking people to take registration and pay tax. Yes. People would certainly pay, when there is clarity and at least the view of the government is made firm by way of a Circular or some like document. This never happens. The entire interpretation is done by the Inspector or Superintendent visiting your premises, and that is the law for the time being.  But your own competitors in the other cities / Commissionerates are not pursued and let off, and thus you end up paying taxes which are neither payable nor at least any of the fellow service-providers are paying. Such a precarious situation would not only affect your business but also encourage many to avoid taxation.

Take the case of computer training institutes. They provide training in computers, which, according to them, is vocational training. The present exemption notification covered  cultural and vocational training from the levy of Service Tax. The earlier Notification No.9/2003-ST covered the third service namely, computer Training as well  but this is not incorporated while issuing notification No.24/2004-ST.  The question is whether such exclusion is to confirm the levy of Service Tax on computer training institutes or because the expression "vocational Training Institute" covers computer institutes also and hence, it is deleted to avoid repetition. The general outlook of the Range level officers is that the subsequent notification being silent about computer training institutes, it goes to follow that they are liable for service Tax. But the equally forceful argument of the trade is that the government is liberally encouraging IT related business by extensive concessions and exemptions and the levy of tax on training is not in tune with this approach when computer training is an undisputed vocational training activity by all tests.

The government can set at rest the entire controversy with a simple clarification - by just saying Yes or No. If the clarification is in favour of the service provider, huge number of service providers, who by themselves are small-time self employment outfits will be benefited. Even if the clarification is not in their favour, still, these people can be happy that all the computer institutes are made to pay and hence they will also fall in line. The position as prevailing today is that the big players in computer education are challenging the levy with the strength and conviction at their command, whereas, the small enterprises, are neither capable of paying the Tax nor are able to withstand the pressure of the officers carrying out the so called "survey" threatening arrest, closure of business and so on for non payment of Service Tax.

Ironically, there is no exemption for even Cultural and the so-called vocational courses for the period from 01-07-2004 to 10-09-2004 and this gap is required to be covered by issue of Section 11C Notification.

Same is the plight of private schools providing studies for class I to class X and above. Here, the curriculam is identical as in the case of a regular student and it is not a tutorial since, their students are not studying in any other school. Merely because, the schools are not recognized by the Government, should these Schools end up paying Service Tax as tutorials when no such Tax is required to be paid by government Recognized schools?  This issue is already two years old and the government is continuing its stoic silence without a murmur about what they have in their mind that is not revealed in the law they made.

Then we have the agony of "Goods Transport Service". The law is deliberately made quixotic even after the Supreme Court holding that the Tax cannot be levied on the person availing the Services (Refer Laghu Udyog Bharathi case). Let's leave this matter to be resolved by the apex court themselves, if some body takes it to them but till then what is the rate of Tax to be paid? Is it the normal 10.2% as applicable to any other service or such service is eligible for 75% exemption as available under Notification No.32/2004-ST dated 03-12-2004.  All this controversy arose since the two conditions in the said notification cannot be applied to the goods transport agency themselves. They read as follows:

Provided that this exemption shall not apply in such cases where -

(i) the credit of duty paid on inputs or capital goods used for producing such taxable service has been taken under the provisions of the Cenvat Credit Rules 2004; or

(ii) the goods transport agency has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.12/2003-ST, dated 20th June 2003 {GSR 503(E), dated 20th June 2003}

And by virtue of the deeming clause, the person availing the Service of GTA has to pay Service Tax and because of this provision, the person availing goods transport Service is a GTA for purpose of these rules. In such a case, since they (factory) are availing CENVAT, they have to pay 10.2% and be eligible for the entire duty credit. There is strong difference of opinion in the department on this aspect and the industry is made to pay either 10.2% or 2.55% purely according to the personal opinion of the individual Range officers. Assuming one of the above interpretations as above to be incorrect, will heavens fall by any clarification on this subject?  Silence is the salient feature of Service Tax administration, I allege!

Then you have the levy of Service Tax on Foreign Service provider providing service to an Indian resident and all that. I can challenge, if a test is conducted on the understanding of these provisions including those special rules recently made out, to the senior officers of the department, not many will succeed. The scope of levy is so cumbersome and the concepts are so foreign and the law is made so complicated. In their anxiety for details, they missed the obvious. Can there be levy of Service Tax on an activity carried out abroad?  Will it not amount to taxing an activity taking place beyond the territory of this vast country? Even if it is so taxable, what is the mechanism available with the department to locate such instances and levy tax? Either god or the TRU have the answer, and both choose to be silent for their own reasons.

At last, the exemption for Small time business providers with less than 4.00 Lakhs turnover is introduced. But, it is only prospective in operation. The average business man in the area of Fax Operators, small local couriers, Beauty parlours and professional like Interior decorators and so on, are still living at the mercy of the field officers. If a case is made out against them they are sure to be taxed and, if for any "consideration" the officer chose to ignore his case, there is none else who can reopen? Is that what Mr Chidambaram visualized and ultimately desired?  Is service tax intended to serve some officers at the cost of the state and the business community?
 
If the legal position as also the attitude of the filed formations are in this bad shape, the whirlwind tour of Mr K.P.Singh, D.G. Service Tax, is more disappointing. In every city he visited, he confined his interaction with public only by way of Press conferences. This opportunity is used more to threaten the trade than to educate them in the right direction. So much of public money is wasted by his unwanted trips all over India and it is equally unfortunate that he used his time in declaring certain institutions as defaulters without a trial. It is not known whether the DG himself had a dream about the scope of levy of Service Tax on any particular Service or there is any single case registered and decided against any of the parties listed by him in different places. Is he unaware, that the assesses would avoid payment of Taxes only when there is a scope to dispute the levy and unless such dispute is resolved, in the appellate mechanism available in the department can he name any body a defaulter? Being senior officer of the department is he not aware that he cannot divulge the data obtained by him in his official capacity, more particularly when such levy itself is in dispute? Does his approach indicate the possible line of action to be adhered to by him in his bright future stints in the same department?

Service Tax, like any other Tax, will be paid by the service provider when the law is made clear and do not provide loopholes for a few to avoid. Since the Tax is available as CENVAT credit, the tendency, to evade by the organized sector will be less. The other services like cash-rich outdoor caterers, event managers and so on require stern and timely action for levy.

 The following is a short compilation of  recent press reports on the DG, Service Tax.- Editor
 
We have registered cases against companies like R P G Netcom, Tata Steel, Bokaro unit of Steel Authority, Mitsui, Citi Cable, Cable Com Services, Carrying Corporation, and Manthan Broadband,” Singh said at a press conference in Kolkata today. The director-general of service tax (DGST) said that the case against RPG Netcom involved Rs 53 lakh, the figure for Citi Cable Rs 29 lakh, Cable Com at Rs 40 lakh, Carrying Corp Rs 34.62, Manthan Broadband Rs 24 lakh, Sail at Rs 1.5 crore and Mitsui at Rs 76 lakh. Singh said that the original case against Tisco involved Rs 3 crore and the company paid up Rs 2 crore with Rs 1 crore pending. There was a fresh case against Tisco of Rs 86 lakh - Business Standard
 
THE Director-General of Service Taxes, Mr K.P. Singh, said that the Hyderabad-based ICFAI University, Hindustan Aeronautics Limited, S.S. Consultants, Vimta Labs and an unnamed public sector undertaking involved in mapping technologies had large arrears of service tax.

Addressing a press conference here on Thursday, Mr Singh said that while ICFAI University needed to pay Rs 16 crore, HAL was due to the tune of Rs 5.75 crore, S.S. Consultants, involved in the construction of the cricket stadium in Uppal here, has to pay Rs 73 lakh and Vimta Labs has to pay Rs 25.92 lakh.

In all, 42 service tax providers with facilities in the Hyderabad Zone of the Commissionerate of Customs and Central Excise were due about Rs 28 crore.

Refusing to disclose the name of the PSU that owed Rs 6 crore in service taxes, Mr Singh, however, said that he was giving the PSU eight days' time to pay the arrears. Otherwise, he said, the name would be made public and a penalty of 200 per cent could be slapped.  - Business Line
 
CHENNAI: A country-wide drive, including search operations, will be launched from tomorrow, to bring all service tax evaders under the tax net, a top government official said on Wednesday. "We will not spare anyone. Pay taxes and sleep well. We mean business," K P Singh, Director General (service tax), told a news conference here. – Economic Times 11.3.2005
 
PSUs ADVISED TO PAY SERVICE TAX OR FACE PENALTY : The Director General (Service Taxes), Mr K.P. Singh has warned that the Public Sector Units (PSUs) in Visakhapatnam and also other States, which fail to pay service tax would not be spared from penalties. A web-based tracking system has been developed to monitor tax-evasion matters and the process of monitoring has been intensified, he added.- Thursday, March 10, 2005  Vizag citinews
 
Bangalore Excise dept to zero in on firms  for service tax-09.02.04-BANGALORE: The Central Excise has decided to conduct searches   to zoom in on those evading service tax. The excise department has even shortlisted certain  agencies who would work to track down defaulters.

Director general of service tax K.P. Singh, who was here to review the tax collection performance of Bangalore zone, on Tuesday put across the department's resolution to physically intervene wherever it finds credible evidence that service tax had been evaded, and to initiate action as per law. A recent raid had caught on a Bangalore-based multinational company engaged in a computer-related business which had defaulted to the tune of Rs 4 crore, Singh told a press conference.
 
Brand Ambassadors Under Service Tax Net

Brand Ambassadors of various companies, including film stars Amitabh Bachhan, Shahrukh Khan and cricketer Sachin Tendulkar, have been brought under the central service tax net. Notices have been issued to them to ascertain how much business promotion activities they had done on behalf of various companies and whether they had paid any service tax, Director General of Central Service Tax K P Singh said. He said most film stars and cricketers are promoting the business of various companies as brand ambassadors and thus had been brought under the service tax net - Indlaw.com February 17, 2004
 
Aishu became a role model by registering her name to submit Service Tax - According to Director-General, Directorate of Service Tax, Mr. KP Singh, Aishu is the only celebrity who got her name registered to submit the Service tax. - Source: Dainik Jagaran (Hindi daily) Lucknow, Pg 12, dated Feb 18, 2004