TIOL-DDT 2247
09.12.2013
Monday

WE received this mail on a cold and frosty winter morning -

"Sir, I am a tour operator in Nagpur and am registered as a Tour Operator under the Service Tax law.

I have launched winter packages to Srinagar. The tour is Ex-Srinagar. Obviously my customers are those staying in Nagpur. I went through the ST Education Guide, Guidance Note 5.2.2 which says that services that are provided in a non-taxable territory are not chargeable to service tax. However, I am told by the departmental officers that I would be liable to pay Service Tax on this tour as, both the service provider and recipient are outside J&K. Can you please have the views of your readers so that if need be I can include ST before I take the tourists on the tour?"

DDT would like readers to respond.

Carpet, Jack Assembly and Rear Visual Barriers are accessories & not required to be added in AV of 3-wheeler - Rs.3.57 Cr demand set aside

THE appellant is a manufacturer of Three Wheelers. Model 601 was cleared by including the value of Rear Visual Barrier, Jack Assembly and Carpet for the purpose of payment of excise duty.

In respect of the other models, the appellant did not supply the aforesaid accessories from the Manufacturing unit but supplied the same from the Spare Parts Division situated outside the factory to the dealers directly and the dealers while selling the Three Wheelers supplied these accessories to the buyers and obviously the cost of these were not included in the AV while discharging CE duty.

The Warranty Manual supplied with the 3-wheeler indicated that Tool Kit, Rear Visual Barrier, Jack and Handle were provided during the vehicle delivery by the dealers.

As per Rule 191(3) of Maharashtra Motor Vehicle Rules, 1989, it is laid down that "every motor vehicle other than the motorcycle, shall at all times be furnished with an efficient jack and other tools necessary to change a wheel or rim and tyre and with the equipment to repair a puncture.”

So, the department booked a case of evasion of CE duty. Out of the duty demand of Rs.3.57 Crores for the period April, 2001 to May, 2006, the assessee paid Rs.2.61crores Under Protest. However, they refused to pay the balance duty of Rs.96 lakhs in respect of the ‘carpets' supplied.

The demand was confirmed in its entirety by the CCE, Pune-III and so the 3-wheeler manufacturer is before the CESTAT.

The appellant adverted to the Rule 138(4) of the Central Motor Vehicle Rules, 1989 and the Rule 191(3) of the Maharashtra Motor Vehicle Rules, 1989 and submitted that these are to be complied with at the time of the plying the vehicle on road and it is not stipulated that the manufacturer should supply these items compulsorily when the vehicles are cleared from the factory. Further, jack assembly, rear visual barrier, carpets etc. are optional accessories and their value cannot be added into the AV of the 3-wheelers in view of the decisions in Amkar Engg. Works, Maruti Udyog Ltd., Daewoo Motors India Ltd. & Bajaj Auto Ltd. and hence the appeal may be allowed.

The Bench observed -

+ These MV Rules, no doubt, specify that while plying the vehicle the driver should ensure that he has the tool kit and jack assembly necessary for change of tyres and rim. However, this is a condition which needs to be met at the time of using the vehicle on the road.

+ The Motor Vehicle Rule does not deal with supply of tool kits by the manufacturer. The tool kits may be supplied by either the manufacturer or by the dealer. Therefore, from the Motor Vehicle Rules, it does not emerge that the manufacturers are mandatorily required to supply the tool kits or jack assembly along with the vehicle.

+ In the large number of decisions cited supra, this Tribunal has consistently held that the value of tool kits and jack assembly are not includable in the assessable value of the motor vehicle.

After setting aside the order, the appeal was allowed with consequential relief.

See 2013-TIOL-1831-CESTAT-MUM

Last Date for Voluntary disclosure is 31st December, 2013

JUST like the ST VCES, 2013 which ends on 31st December, 2013, there is another Voluntary Disclosure opportunity which ends on the last day of this year.

We are talking of The Health and Wellbeing Tax Plan voluntary disclosure opportunity.The Department believes that its assessees want to pay the right amount of tax and wants to help those not paying the correct amount of tax to put that right.

It covers the professionals working in the following areas to declare about all their past income, gains and undisclosed liabilities -

• physical therapy - e.g. physiotherapist, chiropractor, chiropodist, osteopath, occupational therapist

• alternative medicine or therapy - e.g. homeopathy, acupuncture, nutritional therapy, reflexology, nutrition

• other therapy - e.g. psychology, speech therapy, arts therapy

By using this disclosure facility these professionals must notify the department by 31 December, 2013 and then disclose and pay what they owe by 6 April, 2014.

If you notify the department of your intention to disclose, make a full disclosure and co-operate fully, there is an opportunity to minimise penalties on the basis that you have made an unprompted disclosure. Interest is payable from the date taxes are due until the date they are actually paid.

If the money that is the subject of the disclosure is the proceeds of serious organised crime for example VAT fraud, VAT bogus registration fraud, organised tax credit fraud and instances where there is wider criminality (such as an on-going police investigation) such disclosures are unlikely to be accepted under Health & Wellbeing Tax Plan.

If, after 6 April 2014, the department receives information indicating that your disclosure was incorrect, they have the right to look at your tax affairs again.

This Voluntary Scheme is in force in the United Kingdom.

May be, we can think of a similar sector specific scheme under Service Tax for the Construction Industry later.

Pune Bench of CESTAT?

THE Times of India reported on 8th December 2013, "Pune bench of central excise service taxes appellate tribunal (CESTAT) has given the respite in its judgement recently." The paper also reported that. "Those purchasing a house have a reason to cheer. They can buy the property without having to pay any service tax for maintenance and repairs.”

Times of India was obviously referring to 2013-TIOL-1806-CESTAT-MUM which we reported on 4th December 2013.

But there is no Bench of the CESTAT at Pune and CESTAT does not stand for central excise service taxes appellate tribunal.

You can see the TOI report in http://timesofindia.indiatimes.com/city/indore/Service-tax-goes-buyers-smile/articleshow/27040680.cms

Jurisprudentiol – Tuesday's cases

Service Tax

Whether Sodexho Meal Vouchers promote sale of goods/services? - Yes - CESTAT

PURCHASE of vouchers by employer and purchaser of goods and services by employee from affiliates itself promotes the sale of goods and services of the affiliates and therefore meal vouchers of the assessee definitely helps in promoting sale of goods and services of assesses affiliates.

Income Tax

Whether penalty can be imposed merely because assessee claimed deduction of liquidated damages provided for in contract but never filed claim for same - NO: HC

THE assessee, a company, had filed its return of income, which was processed u/s 143(1)(a). Subsequently, a notice u/s 148 was issued on 19.08.2002, proposing to reassess the income for the said AY. The assessment u/s 143(3) read with Section 147 was completed on 29.11.2002, disallowing the claim for provision for liquidated damages in respect of delays in supply of materials, amounting to Rs.74,50,000/-. The AO thereafter issued a notice and initiated proceedings u/s 271(1)(c). Not satisfied with assessee's reply, AO imposed penalty of Rs.26,50,000/-. On appeal, CIT(A) had dismissed the appeal both regarding quantum and penalty. Aggrieved by both such orders, assessee preferred appeals to the Tribunal. By a common order, Tribunal had dismissed the quantum appeal and allowed the appeal filed against the order of penalty.

The issue before the Bench is - Whether penalty can be imposed merely because assessee claimed deduction of liquidated damages provided for in contract but never filed a claim for the same. And the answer goes against the Revenue.

Central Excise

Manipulation of Gate Register - Availment of CENVAT Credit without goods being brought into factory - entire conduct of assessee clearly shows guilty mind and intent to evade duty - Explanation to s. 11A(2B) of CEA, 1944 comes into play and, therefore, reversal of credit would not help- respondent liable to interest as well as penal consequences -Revenue appeal allowed: CESTAT

THE respondent took CENVAT Credit of CVD amounting to Rs.30,56,260/- in respect of goods purportedly imported vide Bill of Entry without receipt of the goods in their factory. However, in the Gate Register maintained at the factory, entries were made showing the receipt of the goods on 30.6.2001. The goods were imported on 20.7.2001 and the consignment left Mumbai on 21.7.2001 to their customer M/s. Dhanlaxmi SSK Niyamit, Belgaum as per the container transport consignment note dated 21.7.2001. However, the appellant took credit of CVD paid on the said imported goods on 31.10.2001.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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