TIOL-DDT 2926
08 09 2016
Thursday

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WHAT is the authority to levy Service Tax? How is the Central Government competent to collect Service Tax?

I am grateful to the readers who responded to the DDT question. Several Departmental officers, advocates and Industry leaders sent in their answers.

What prompted me to ask this question was the inadvertent remark of a leading consultant in a GST speech (there are too many people speaking on GST these days) recently that Service Tax is levied by virtue of the powers from Entry 92C in List 1 of the Seventh Schedule to the Constitution.

Sharad Misra, a Superintendent of Central Excise wrote in:

The authority to levy Service Tax is derived from List 1 entry 92C of Schedule VII of the Constitution of India.

Further as per Article 268A the Constitution also provides that Taxes on services shall be levied by the Government of India and such tax shall be collected and appropriated by the Government of India and the State in the manner provided.

The problem is that entry 92C was inserted by Constitution eighty eighth amendment Act, 2003, s.4 which is yet not in force, date to be notified later.

That is exactly the problem; many officers, lawyers and judges believe that Entry 92C gives the Central Government the power to levy service tax, little realizing that entry 92C was to come into force from a date to be notified and the government never notified the date. So, 92C is out.

In an article for us in June 2009, the eminent senior advocate Arvind P Datar wrote, "Interestingly, Entry 92C and Article 268A were inserted by the 88th Amendment to the Constitution. But both these have not been notified till date."

In the Madras Hire Purchase Association case - 2009-TIOL-338-HC-MAD-ST, argued by Mr.Datar, the Madras High Court observed, "Service tax is made by Parliament under Entry 92C of List I and Article 268-A… "

I asked Mr.Datar on this immediately after the High Court judgement was delivered. He told me, "I had specifically argued that 92C and 268A had not been notified; we are moving the Supreme Court against this order." He did and the Supreme Court in 2010-TIOL-87-SC-ST-LB observed, "this Court has on three different occasions upheld the levy of service with reference to Entry 97 of List I in the face of challenges to the competence of the Parliament based on the entries in List II and on all the three occasions, this Court has held that the levy of service tax falls within Entry 97 of List I."

So, Service Tax is levied under the residual entry 97 of the Seventh Schedule to the Constitution, and not under entry 92C as strongly believed by many.

Now the Constitution Amendment Bill to bring in GST specifically provides for omitting Entry 92C in the Seventh Schedule and Article 268A in the Constitution. Remember these provisions were never notified.

Why to omit the entries which were never notified?

The Select Committee of the Rajya Sabha answered that question:

The Committee is of the view that Entry 92C was inserted by the Constitution (Eighty-Eighth Amendment) Act, 2003 to empower the Union to impose service tax on certain services read with article 268A of the Constitution.

Notwithstanding, the service tax levied under the Finance Act, 1994 were continuing as such. The amendment was carried out in the Constitution but the provision was never brought into force. Since Parliament has enacted the said constitutional provision and as such the provision stands as the part of Constitution; unless it is omitted by a Constitution Amendment Act by Parliament, it will continue to sit in the Constitution. Therefore, it is necessary to omit the said provision to ward of any future doubts about GST.

Entry 92C was brought in only in 2004, but there was service tax much before that - obviously under entry 97. If services could be taxed under entry 97, why bring in another entry 92C?

The Statement of Objects and Reasons for the 88th Amendment Act states:

At present, the item relating to "taxes on services" is not specifically mentioned in any entry either in the Union List or in the State List of the Seventh Schedule of the Constitution. Parliament has the exclusive power to make laws with respect to entry 97 of the Union List for any other matters not enumerated in List II or List III including any tax not mentioned in either of those Lists. In exercise of this power, the Central Government has periodically taxed certain services at the rate of five per cent. ad valorem.

The proposed amendment would help in significant augmentation of revenues of the States in accordance with the proposed law, and pave the way for eventual inclusion of services within the purview of State level VAT.

The then Finance Minister Jaswant Singh told the Parliament,

In most developed countries goods and services are traded and taxed together. Taxation of services in India was started through the Union Budget of 1994-95 when it was levied with effect from July 1, 1994 on stockbrokers, general insurance and telephone services.

The power to levy tax on service is, however, not specifically mentioned either in the Union List or in the State List or in the Seventh Schedule of the Constitution. Entry 97 of the Union List gives power to the Centre for levy and collection of any tax not mentioned in either List II or List III. At present, therefore, the Parliament has the power to levy and collect tax on services only as a residual taxation matter. In exercise of this power, the Central Government had periodically taxed selected services.

This is a provision to include a tax measure in the Union List so that both the Centre and the States can collect it. The duty and the responsibility of levying the tax remains of the Union Government.

But after all these efforts, why was the amendment not notified? Waiting for GST?

Actually I had answered this question in detail in DDT 2648 and 2649.

Once again DDT thanks the netizens who enthusiastically answered the question - it was a sheer pleasure to go through the replies.

Customs - Procedure for Removal of EGM Error

AS per Section 41 of the Customs Act, 1962, the person-in-charge of a conveyance carrying export goods shall, before departure of the conveyance from a Customs station, deliver to the proper officer in the case of a vessel or aircraft, an export manifest, and in the case of a vehicle, an export report, in the prescribed form.

It seems that a large number of shipping bills processed at the Indian Customs EDI (Electronic Data interchange) System get stuck either because of wrong or incorrect entry of the Airway Bill Number at the time of Goods Registration of export cargo, or due to incorrect feeding of data in the ICES EDI system either at the service centre or at ICEGATE. Further, it is observed that 'L' i.e LEO error occurs when the system is down or slow and print is delayed but LEO had been given and this needs to be cleared in the ICE gate forcefully with update.

The Commissioner of Customs, Air cargo Complex, Mumbai informs in a Public Notice that in order to facilitate quick removal of EGM Errors in the EDI System, henceforth Error L i.e., LEO Error will be removed by the Batch Officer posted in Export Shed. The representative of the Airline/CHA should approach the Batch Officer with the request letter for removal of Error L i.e., LEO Error and thereafter the Batch Officer will remove the error in the EDI system after verifying the details in the S/Bill and the EGM.

Mumbai Air Cargo Complex Commissioner Public Notice No.34/2016., Dated: September 03 2016

Police to Upload FIRs on website: Supreme Court

IN a significant judgment yesterday, the Supreme Court ordered:

+ The copies of the FIRs, unless the offence is sensitive in nature, like sexual offences, offences pertaining to insurgency, terrorism and of that category, offences under POCSO Act and such other offences, should be uploaded on the police website, and if there is no such website, on the official website of the State

+ Government, within twenty-four hours of the registration of the First Information Report so that the accused or any person connected with the same can download the FIR and file appropriate application before the Court as per law for redressal of his grievances. It may be clarified here that in case there is connectivity problems due to geographical location or there is some other unavoidable difficulty, the time can be extended up to forty-eight hours. The said 48 hours can be extended maximum up to 72 hours and it is only relatable to connectivity problems due to geographical location.

+ The decision not to upload the copy of the FIR on the website shall not be taken by an officer below the rank of Deputy Superintendent of Police or any person holding equivalent post.

+ If an FIR is not uploaded, needless to say, it shall not enure per se a ground to obtain the benefit under Section 438 of the Cr.P.C. (anticipatory bail)

+ The directions for uploading of FIR in the website of all the States shall be given effect from 15th November, 2016.

Anti Dumping Duty on Para Nitroaniline - Extended

GOVERNMENT  had imposed anti dumping duty on Para Nitroaniline, originating in, or exported from, People's Republic of Chinaby Notification No. 88/2011-Cus, dated 09.09.2011. The anti dumping duty would have expired today.

On the recommendation of the designated authority, the government has now extended it till 8th day of September 2017. Just In Time!

Notification No. 49/2016-Customs(ADD)., Dated: September 07 2016

Bakrid Holiday on 13th instead of 12th

IT has been decided to shift the Id-ul-Zuha (Bakrid) holiday to 13th September, 2016 in place of 12th September, 2016 as notified earlier, for all Central Government administrative offices at Delhi / New Delhi.

For Offices outside Delhi / New Delhi the Employees Coordination Committees or Head of Offices (where such Committees are not functioning) can decide the date depending upon the decision of the concerned State Government.

DoPT office Memorandum in F.N0.12/11/2016-JCA2., Dated: September 06 2016

Until Tomorrow with more DDT

Have a nice day.

Mail your comments to vijaywrite@tiol.in