Service Tax on GTA - DGSTs missive still active
TIOL-DDT 341
13 04 2006
Thursday
The field refuses to believe that the DG, Service Tax has withdrawn his controversial letter on availability of credit on Service Tax on GTA service.
In TIOL-DDT 92 - 11 04 2005, we wrote,
Service Tax - Goods Transport- DGST causes further confusion.
What will the poor assessees do if the officers who are meant to be there to solve their problems themselves create confusion? Most of the Central Excise assessees who are also required to pay Service Tax on goods transport have been paying tax only on 25% of the value in terms of Notification No. 32/2004-Service Tax, Dated : December 3, 2004 and they are right. Now the DG, Service Tax has issued a clarification to all the Chief Commissioners that this exemption is available only if the transport agency pays the tax and not if the consignor or consignee pays it. The learned honourable and totally confused DG does not mention, why he thinks so. The notification does not insist on any such condition. Sadly the DGs understanding of the notification is different, but the moot question is, what is the DGs authority for issuing such a clarification? Of course thankfully his clarification is contained in a letter to the Chief Commissioners who have been asked to share this wisdom with their commissioners. Now the Commissioners or at least their Superintendents will have a lot of explaining to do in the field to convince the assessees that they have to pay tax on the full value and not 25%, because the Honourable DG, Service Tax thinks so. The DG is not the Board and therefore his clarifications are not binding even on the department let alone the assessees. But the field is certainly not going to keep quiet. DDT asked a senior officer who felt that the DGs clarification is patently wrong whether he was going to implement it. Of Course, I am, he said. But Why Sir?, He is not the Board and you are not bound by his clarifications , DDT asked. HE is going to be in the Board soon and that is good enough reason, was the cryptic reply. Before the field goes on the rampage, it is hoped that the CBEC will come with a proper clarification. Some time back the CBEC had issued a direction to the Commissioners not to issue Trade Notices. The Board should come with such a clarification that DGs should not give clarifications -especially on important issues like notifications. This should be the exclusive purview of the Board after all they make these notifications and they know the intention. Further they can obtain the views of the Law Ministry and also amend notifications even with retrospective effect, if necessary. This one small clarification of the DG will result in thousands of Show Cause Notices, if the Board does not come up with an urgent clarification.
Two days later in TIOL-DDT 94 - 13 04 2005, we wrote,
Service Tax on GTA - DG withdraws clarification
WE are happy to report that the DG Service Tax has withdrawn the controversial clarification we reported yesterday. On behalf of thousands of assessees spread across this large country, we express our deep feelings of gratitude to the DG Service Tax for the courage in withdrawing the clarification which we pointed out was patently illegal. Any one can make a mistake; it takes real strength to correct a mistake. A responsible and responsive tax administration ready to admit a mistake and that too promptly before much damage could be done is the greatest happening. Now the consignors/consignees can continue to pay Service Tax on 25% of the value. Yesterdays storm was only one in the tea cup and it has blown over. Alls well that end well. Your Taxindiaonline promises to humbly continue with its mission to constantly watch and report such aberrations and this kind of prompt corrections boost our morale. Thank you DG!
But officers in the field who knew their DG were not prepared to believe that the DG would withdraw his circular. So in TIOL-DDT 105 - 02 05 2005, we confirmed that the DG had indeed withdrawn his circular.
Service tax GTA - DGSTs clarification Truly withdrawn
Since DDT carried the information on 13-04-2005 that the DGST has withdrawn its controversial clarification on service tax on GTA, we were flooded with request for copies of the clarification. While the Chief Commissioners were very prompt in sending to the field the DGFTs original, clarification it appears that withdrawal of the letter has not been communicated to the field. One hapless assessee wrote to us that his Range Officer is asking him to produce a copy of the DGSTs letter or pay higher tax. We confirm that the DGST has indeed withdrawn the clarification in a letter address to all the Chief Commissioners. The letter states :
The letter F NO V/DGST/43-GTO/02/2005 dated 30.3.2005 issued by this Directorate in respect of applicability of Notification No 32/2004 dated 03.12.2004 is hereby withdrawn. And it is signed by the DG himself. It would be very nice if the DG gives an official clarification that his original clarification is withdrawn to avoid further damage.
The officers are not impressed and DDT understands that Show Cause Notices are being issued in several places. Recently the Commissioner, Service Tax in the Board clarified in a seminar that the DGs letter was indeed withdrawn. But even this is no leash for the Show Cause Notice hungry officers. They continue to be issued merrily. DDT got this frantic mail from a harassed assessee,
Though TIOL has reported that the 75% abatement on GTA is available to everyone as per clarification given by Mr. Gautam Bhattacharya - Commissioner of Service Tax, our local Service tax office (Raigad commisionerate in Maharashtra) is not ready to listen to this and asking us for the payment. They are in fact in the process of issuing show cause notices to us.
We are surprised at the attitude of this office. Is it possible that the DGST has not issued any circular to its offices? What should we do?
We confirm that the DGST has withdrawn his letter and this was confirmed by the Commissioner, Service Tax in CBEC. It is exactly a year since the DG has withdrawn his clarification but it strange that field officers are more loyal than the king. The Chief Commissioners who were prompt ion communicating the DGs letter were not equally prompt in communicating his withdrawal. Unnecessary litigation is being produced and multiplied. Board and the DGST should once again clarify that the instructions are withdrawn and any body who acts on the withdrawn instructions should be punished.
With a hope to put the issue to rest we are giving here a copy of the letter from DGST withdrawing his instructions. It may please be noted that the letter is signed by the DG himself.
Are IIMs manpower recruiting agents?
The Service Tax department thinks so. And so they would want the IIMs to pay Service Tax. The IIMs are not impressed. Recently the IIM graduates got employed from the campus with fancy salaries. The Service Tax department thinks, it is entitled to a share in the booty.
IIM, Ahmadabad Director Bakul Dholakia feels that the IIMs are not liable to pay Service Tax. According to him,
the IIM-A is not a manpower recruiting agency and therefore does not come under the purview.
He admitted that the IIMs are charging US ,000 to Rs 1,50,000 per candidate. The director said the institute incurred Rs 3.5 lakh as expenses on each student of the post-graduate programme of which Rs 1.5 lakh were recovered as fees from the students while the rest were recovered from the companies who came for campus recruitments.
"IIM-A can by no stretch of imagination be compared with a manpower placement agency. We are opposing this on principle," according to the IIM-A Director, Prof. Bakul Dholakia.
The IIMs collect the placement fees from recruiters only to keep the cost of education low for the students and this principle has been agreed upon by the Government, Prof Dholakia said.
Asked what would happen if the IIM lost its case with the Service Tax Department, Prof Dholakia said the companies visiting the campus had been informed about the possible liability. However he added that, we oppose it as we are an educational institute and not a placement agency”
Service Tax officers are fond of summoning officers and the summons look very threatening. Recently a professor was summoned to furnish particulars for a subsequent period to a period for which he had already been given Show Cause Notice. His plea that for furnishing records, he not need not be physically present was not appreciated. They insisted that he should appear in person. Now the IIM director is in serious danger of being summoned by a Superintendent. The policy of the government is to encourage education not to tax it???
New and simplified income tax law
A new and simplified income tax law is in the offing and the government is working on a comprehensive legislation to replace the cumbersome and voluminous Income Tax Act.
Four working groups have been set up to provide inputs for drafting a new income tax legislation and they would submit their reports by this month-end.
The Finance Minister had announced in last year's budget that a new comprehensive Income Tax Bill would be drafted by 2005-end to replace the archaic law as part of tax reforms.
Mohammedan Sporting appoints controversial Central Excise Superintendent as coach
It was only about four months ago that East Bengal coach Subhas Bhowmick was caught by CBI for receiving an alleged bribe. Apparently Bhowmick is a good coach and now Mohammedan Sporting has appointed him coach.
 In pari passu |
On equal footing - side by side
Creditors who are entitled to receive out of the same fund without any precedence over each other
++ Thus whatever course is open to the appellate authority while disposing of an appeal would apply pari passu to an application made under Section 35E and thus would include the power to condone the delay also.
++ increase of modvat credit would be pari passu with the increase in the payment of duty on the inputs
++ Section 11A is a recovery provision and the two Sections 11A and 11B, although in a sense complementary, are not really pari passu.
++ the income-tax payable also being a debt has to rank pari passu with other debts due from the company
Litigation - A machine which you go into as a pig and come out as a sausage.
Until Monday with more DDT
Have a nice extended weekend.
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