TIOL-DDT 1093
21.04.2009
Tuesday

CBEC has amended Notification No. 14/2002 – Central Excise NT which specifies the jurisdiction of Chief Commissioners, Commissioners and Commissioners (Appeals). Pune II is now to be read as Kolhapur.

But there are other notifications;

2. Notification No. 25/2005-CENTRAL EXCISE ( N.T), Dated: May 13, 2005, which specifies the Committees of Commissioners of Central Excise.

3. Notification No. 14/2002-Customs ( N.T), DATED : March 7, 2002, which appoints Chief Commissioners of Customs.

4. Notification No. 39/2005-Customs (NT), DATED : May 13, 2005, which specifies the Committees of Chief Commissioners of Customs.

5. Notification No. 49/2005-Customs ( N.T), Dated: June 17, 2005 which specifies the Committees of Commissioners of Customs.

All the above notifications mention Pune II Commissionerate. But only one notification namely 14/2002 – CE NT has been amended. The Board needs to substitute Kolhapur for Pune II in all the above notifications.

Hopefully they will do it soon, before some Tribunal throws out their cases for lack of jurisdiction. Or perhaps they have already done it and are keeping it a secret for some strange reason and will reveal it in a couple of days.

Notification NO. 7/2009- CX ., ( N.T. ), Dated: April 17, 2009

Air Travel Agents – taken for a ride

Not only the actions, but the memory of Government officials is also pro revenue. Every time there is increase in the service tax rate, they never forget to make corresponding amendments in the rules. But when there is a decrease in the tax rate, they need to be reminded by the tax payers regarding the anomalies. We are talking about the service tax payable by the Air Travel Agents. The tax is payable at the rate specified in Section 66 of the Finance Act, 1994 on the amount of commission received. However, rule 6(7) of the Service tax rules, 1994 provides an option to pay service tax at the rate specified in the sub-rule on the basic fare. The rate payable on the basic fare has been arrived at by adopting the commission at the rate of 5% on domestic bookings and at the rate of 10% on international booking.

So, whenever, there was increase in tax rate under Section 66, corresponding amendment was promptly made in rule 6(7) of the Service Tax Rules, 1994, but when the rate has been reduced from 12% to 10% with effect from 24.2.2009, no corresponding amendment has been made so far. A concerned Air Travel Agent sent us a mail seeking clarification whether he has to pay at 0.6%/1.2% even when the tax rate is 10%.

YES sir, until the rule is amended.

Tax Evasion - Canada Ishtyle

Recently Revenue Canada known as Canada Revenue Agency (CRA) unearthed a massive tax evasion case.

Three construction companies funnelled huge money to two "dummy" corporations that have no commercial activity and that were used as part of a false invoicing scheme. This type of scheme allows individuals or companies to obtain invoices from, generally, an inactive company for fictitious work. The invoices are then used to fraudulently reduce the individuals' or companies' revenues. The resulting tax savings are shared by the scheme's participants to use as pay offs or for personal gain.

The government investigated the matter, and suspected that one of its officials had worked behind the scenes to protect the inactive numbered company. Search warrants were executed against four CRA employees and these employees were suspended without pay for the duration of the CRA internal investigation.

The fraud was so massive that it was announced at a press conference by Jean-Pierre Blackburn, Minister of National Revenue. The Minister said, “The CRA actively pursues tax evaders to maintain public confidence in the integrity of the tax system. The Government is committed to protecting Canada's tax base and continues to take action against the underground economy, which appears to be more active in certain sectors.”

Is the CRA a corrupt body? The Minister does not think so and said,” The CRA has approximately 45,000 professionals across the country and is recognized and respected for its strong administration. Controversies involving one or more employees do not reflect the honesty and integrity of the thousands of CRA employees who conduct themselves in an exemplary fashion.”

Now the amount alleged to have been funnelled off which called for comments from the Minister himself – close to 4.5 million dollars amounting to about 18 Crores of rupees. And these are only charges – not yet proven. In India not even a Chief Commissioner would bother with such petty cases.

No Service Tax on Renting of Immovable Property – Delhi High Court order

Since Saturday, we have been flooded with requests for the Delhi High Court‘s order quashing the Service Tax on renting of immovable property. All our submissions that the order is not yet ready did not convince many Netizens. It must be understood that it takes a few days for the order to be typed, corrected and signed by the judges. We will bring you the judgement as soon as it is available in the public domain.

Jurisprudentiol–Tomorrow's cases

Miscellaneous

When an order of a statutory authority is questioned on ground that same suffers from lack of jurisdiction, alternative remedy may not be a bar: Supreme Court

THE question as to whether the Notification could have a retrospective effect or retro-active operation being a jurisdictional fact, should have been determined by the High Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India as it is well known that when an order of a statutory authority is questioned on the ground that the same suffers from lack of jurisdiction, alternative remedy may not be a bar.

Income Tax

TDS - perquisite to expatriate employee - disallowance u/s 40(a)(iii) - perquisites have no identity independent of salary - assessee need not deduct TDS separately for perquisite as it is part of salary income: ITAT

ARE salary and perquisite two distinctively different terms? Does perquisite have its own identity as an income to an employee? Does an employer need to treat perquisite separately for deducting tax at source under Sec 192 or treat it as part of income under salary head? In an interesting case involving an expatriate, the ITAT has held that when the income under the head salary is computed, the valuation of the perquisites forms part of salary and there is no separate identity given for the purpose of sec. 192.

Service Tax

Amount collected prior to levy of service tax and service rendered after the service becoming taxable - the appellant is liable to pay service tax - any other view would amount to rigorous construction of machinery provisions: CESTAT

WHAT is the relevant date for deciding the service tax liability? Is it the date of receipt of payment? Is it the date of rendering the service? Is it the date of issuing the bill or invoice? How does one decide to pay service tax when the tax rate has been reduced, say from 12% to 10%? There seems to be no end to the confusion prevailing on this important issue and nobody is really seriously concerned.

In a recent case, this issue came up before the Tribunal. The appellant is engaged in providing commercial coaching or training service. The service was brought into tax net with effect from 1.7.2003. The contracts for providing the service were entered prior to 1.7.2003 and the amounts were also received in lump sum prior to 1.7.2003. But the service was actually rendered after 1.7.2003. The dispute is whether the service tax is payable on the amounts received prior to 1.7.2003, when the service was not taxable.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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