A number of distillers are engaged in manufacture of Indian Made Foreign Liquor of various brands, on job work basis, on behalf of the brand owners. The activity involves blending, manufacturing, bottling, labelling, etc. These job workers do not have any proprietary rights over the goods produced. They are paid job charges by the brand owners who have the proprietary rights over the goods and who market and sell the IMFL produced by job workers. A doubt has arisen as to whether this activity of job worker falls under the category of taxable service, namely, 'Business Auxiliary Services' for the purposes of charging service tax under the Finance Act, 1994. 

The Board vide F.No. 249/1/2006-CX.4 had issued a Draft Circular saying that the above activity falls under Business Auxiliary Service and the IMFL job workers are liable to pay service tax. The circular was issued to elicit response from the public and the responses to the above Draft Circular were to be sent by 20.10.2006. 

Nearly 20 months have passed since the draft circular was issued and the second birthday is fast approaching and the draft circular remained as draft so long. What happened to the responses? Has the Board forgotten the Circular? Or is the response from the Liquor lobby so strong that the file has been kept in the cold storage?  

In a case reported yesterday in TIOL, the West Zonal Bench of Tribunal prima facie held that “it is only manufacture of goods liable to Central Excise duty which would stand excluded from the purview of Business Auxiliary Services” and ordered pre-deposit of Rs 25 Lakhs 2008-TIOL-1161-CESTAT-MUM

After taking its own sweet time of almost two years and finally if the Board says Service tax has to be collected, how do they expect the field to raise demands when the matter was within the knowledge of the Board and no suppression can be invoked? Board has ignited confusion in the minds of trade and field formations and just forgot to extinguish it.

Please also see TIOL-DDT 463 05 10 2006

Mobile payment – RBI wants banks to go slow

We are bombarded with how happy our lives will be if we have a mobile connection. We can talk to our near and dear, who are near and far. Talk time unlimited, talk day and night at no extra costs, no roaming charges blah blah blah. Recently, some service providers have also started more suvidha services where you can send money to your near and dear, pay your bills etc and after all these chores if you exhaust your talk time, you can recharge too on your mobile. When service providers are churning out innovative ideas to stay ahead in the mobile race, RBI is waving the red flag.

Reserve Bank of India is in the process of finalizing the Operative Guidelines for banks on mobile payments. The Draft Guidelines were placed on RBI website and a number of comments have since been received. The comments are being compiled and after evaluation of the comments, the final Guidelines would be issued.

In the meantime, some banks have already started offering mobile payment services to their customers without waiting for the release of RBI's Guidelines.

While RBI has no objection for use of mobile channel to provide basic services such as mobile alerts for credit or debit entry, balance enquiry etc. which are in the nature of providing information, it cautions that due care needs to be taken for permitting the channel for customers to initiate payment instructions.

There are a number of attendant issues and therefore, banks are advised to keep on hold their mobile payment services till issuance of the final Guidelines. Banks may also dissociate themselves from any mobile based money transfer service which has not received explicit approval of RBI or not covered by any of the Guidelines issued by RBI.

The draft Guidelines contain some interesting information – a sample:

International Experience

There is very little material available on the regulatory frame work for mobile payments by central banks. Although there are a number of research articles available, they refer to the practices available rather than regulatory guidelines. Efforts to collect specific regulatory guidelines, from a few countries where person to person remittance through mobile channel has been implemented, have not been a success. Mobile payment framework in most countries is covered under the General Electronic Banking Guidelines. However, on the website of Consultative Group for Assisting the Poor (CGAP), there are several discussion papers on mobile payments. Examples of Kenya, Philippines, South Africa and Tanzania have been described in great detail. In these countries, cash-in and cash-out for the purpose of remittance is permitted to be done by the distributors of mobile companies. State Bank of Pakistan has also placed a 'Draft policy paper on Regulatory Framework for Mobile Payments in Pakistan' on their website for public comments.

So all those mobile addicts have to wait to get more suvidha services till RBI guides the banks on how to receive and transmit your payments.

Maybe in the next confidence vote in Parliament, they can dump a bunch of mobile phones on the Secretary General's table to show how much money had been transferred!

DPSS.CO.No.144/02.23.01/2008-2009, Dated: July 22, 2008

Banking facilities to visually challenged 

It has been brought to the notice of the RBI that visually challenged persons are facing problems in availing banking facilities. RBI informs that banking facilities including cheque book facility / operation of ATM / locker, etc. cannot be denied to the visually challenged as they are legally competent to contract. 

So RBI has advised that all the banking facilities such as cheque book facility including third party cheques, ATM facility, Net banking facility, locker facility, retail loans, credit cards, etc. are invariably offered to the visually challenged without any discrimination. 

RBI wants the banks to advise their branches to render all possible assistance to the visually challenged for availing the various banking facilities. 

RPCD.CO.RRB. No. BC 13 /03.05.33/2008-09 Dated  23 July, 2008

Jurispruden tiol – Tomorrow's cases

Service Tax 

Cenvat Credit on Canteen, Catering Services – Revenue's ROM applications dismissed

•  Failure on the part of the Revenue to make enquiries is not an error apparent on record and needs no rectification;

•  It cannot be said that the Tribunal has not considered the material evidence on record available before it;

•  Non-citing of an existing judgement and failure to rely on the same before passing of the Final order would not give rise to any mistake in order warranting any rectification;

•  Findings have been given in great detail and after due consideration of all the issues raised before the Tribunal;

• There is no error apparent on record in the Tribunal's order.

Customs  

Any issue arising out of drawback related matters, which entails penal provisions has to be seen and linked in context of issue on which penal action stands and penalty alone cannot be separated from core issue – Tribunal cites lack of jurisdiction while dismissing appeal

The Bench observed that the issue of non-imposition of redemption fine is interlinked with the claim of drawback and hence the appeal is not maintainable in asmuch as the proper recourse for the exporter is to file an appeal with the Revisionary authority viz. the Government of India.

Income Tax  

Interest on excess refund – Not applicable for assessment year 2003-04 and earlier years: ITAT Special Bench

No retrospective application for Section 234D: “There is no dispute to the proposition that court cannot read anything into a statutory provision which is plain and unambiguous A statute is the edict of the legislature. The language employed in a statute is a determinative of the legislative intent and according to the first and primary rule of construction the intention of the legislation must be found in the words used by the legislature itself and the function of the court is only to interpret the law and court cannot legislate, if a provision of law is misused and subjected to the abuse of the process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. Legislative causus omissus cannot be supplied by judicial interpretative course.” Thus, on the basis of argument that legislature has brought this provision just to fill the lacuna in the law and, therefore, these provisions should be construed retrospective cannot be accepted more particularly when these provisions have been inserted on the statute w.e.f. 1st June, 2003 and not with retrospective effect. The legislature has specifically mentioned the date of applicability i.e., 1st June, 2003 and the legislature was not incompetent to make retrospective provision, if it was so intended. Therefore, merely on the basis of interpretation, retrospective effect cannot be given to the provisions of Section 234-D.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice Day.

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