SERVICE Tax on transport of goods has always been a jinxed tax. The tax imposed on transport of goods by Rail introduced in this year's budget is no different. The Railways really never took the tax seriously. We spoke to several Rail Officials and they considered the tax to be a joke.

In DDT 1180 - 21.08.2009, we reported,

DDT asked a senior Railway officer whether they were ready to collect Service Tax on goods transport. He told us that the Finance Ministry has no right to levy Service Tax on Rail freight and he had no instructions to collect the tax. He said his Board does not recognise this tax. We tried to explain to him that this was an Act passed by Parliament, but he was not impressed. He was sure that it requires approval by his Board and as of now his Board was not too keen to approve the Finance Act. He was aghast that somebody is trying to tax the Railways! When told that Railways are already paying Service Tax on catering, he said it was paid by IRCTC and not by Indian Railways. We really don't know whether Mamata Didi has the same views.

We had reported in yesterday's DDT

The mighty Indian Railways are in for a battle with the Indian Revenue. We spoke to several Railway officers who were either ignorant or arrogant about the new levy. Many officers told us that the Excise Department cannot levy any tax on Rail freight and the Rail Ministry is not going to agree to any such proposal.

We tried to argue with them that it is not a proposal, but THE LAW – many of them were not convinced.

Anyway, finally the Rail Babus had the last laugh – they did not make any arrangements to collect this tax – they knew all through that it will never be implemented. We mistook their confidence for arrogance. We regret that we mistakenly thought that a law passed by Parliament is supreme – we never really understood that a Department/ministry of the Government of India will show such scant respect for the Parliament and get away with it. It is not easy to get mighty organisations to be tax compliant.

The Indian Railways have won over the Indian Revenue and Parliament. There will be no service tax on transport of goods by Rail – at least as of now.

The elusive notification which we could not get yesterday is now available. The Train has arrived. We had reported about the late arrival of the train, early in the morning.

Consequently the abatement Notification No. 1/2006 is again amended to restore it to the pre September 2009 position. That means the position with regard to levy of service tax on transportation of goods by rail is rolled back to the pre-September 2009 in which case only the service rendered by any person other than Government Railways in relation to transport of goods in containers by rail would be subjected to tax.

Notification No. 33/2009 and Notification No. 34/2009 – Service Tax: Dated 1st September, 2009. 

Service Tax – Sub-brokers exempted – not a commission agent

In his Budget DO Letter, the JS, TRU clarified,

The present definition of a stockbroker [section 65(101)] includes sub-broker as well. A number of cases have been booked in the recent past where the sub-brokers have been asked to pay tax on the remuneration they receive from the stockbroker. Previously, the sub-brokers could issue contract note and receive amounts from the investors. With effect from 01.06.2005, SEBI regulations have prohibited sub-brokers from these activities. The role of sub-brokers has thus reduced substantially.

Considering that the entire broking charges are anyway taxable at the hands of stock-broker and a large number of small sub-brokers have to comply with the service tax laws, the sub-brokers have been excluded from the purview of service tax by making suitable amendment in the definition of stock-broker. It is also clarified that such sub-brokers should also not be charged to service tax as commission agents under Business Auxiliary Service . For this purposes, specific exemption notification would be issued at the appropriate time.

The appropriate time has come and the Government has exempted the taxable service provided by a sub-broker, to a stock-broker in relation to sale or purchase of securities listed on a registered stock exchange from the whole of the service tax leviable.

Notification No. 31/2009 – Service Tax: Dated 1st September, 2009. 

Service tax – BAS - manufacture of pharmaceutical products - exempted

Government has exempted taxable service covered under Business Auxiliary Service, in relation to the manufacture of pharmaceutical products, medicines, perfumery, cosmetics or toilet preparations containing alcohol, which are charged to excise duty under Medicinal and Toilet Preparations (Excise Duties) Act, 1955 from the whole of the service tax leviable.

Notification No. 32/2009 – Service Tax: Dated 1st September, 2009. 

Health Warning on Tobacco Products – Instructions to Customs and Excise Officers

CBEC has instructed that the officers of Central Excise & Customs should ensure that no tobacco products are cleared from the premises registered with the Central Excise department or imported into India without bearing the specified health warning and other requisites as prescribed in the Rules.

Ministry of Health & Family Welfare has notified the Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008 prescribing the manner in which the specified health warning shall be displayed on the tobacco product packs covering all types of tobacco products, produced, supplied or distributed in India. The Rules have come into effect from 31.05.2009.

All the tobacco products manufactured/ packaged/ imported for sale in India have to bear the specified health warnings as prescribed.

CBEC Circular No. 896 /16/ 2009-CX - Dated 1st September, 2009. 

Service Tax – Exemption for tour operator Service – Corrigendum to Notification after nearly two months

Notification No. 20/2009-Service Tax, dated the 7 th July, 2009, exempts the taxable service referred to in sub-clause (n) of clause (105) of section 65 of the Finance Act, provided or to be provided to any person, by a tour operator having a contract carriage permit for inter-state or intrastate transportation of passengers, excluding tourism, conducted tours, charter or hire service, from whole of the service tax leviable thereon under section 66 of the said Finance Act.

This notification was issued on 7th July 2009. Now the Government has issued a corrigendum on 31st August stipulating that ‘contract carriage' to be replaced with “contract carriage or tourist vehicles with a permit”.

We will discuss this issue tomorrow.

Corrigendum Dated 31st August, 2009

Adjudication of Customs Cases – Board re-fixes Monetary levels

The new limits are:

Board clarifies that notwithstanding this revision, in all cases where the personal hearing has been completed, orders will be passed by the Adjudicating Authority before whom the hearing has been held. Such orders should normally be issued within a month of the date of completion of the personal hearing.

Board also wants Commissioners to consider offloading some of their adjudication work to the Additional Commissioners, as if the Additional Commissioners are free. No Commissioner keeps his Additional Commissioner free.

This post of Additional Commissioner is a strange one in the CBEC. He has hardly any powers or responsibilities – He is almost a Commissioner, but almost is not half as good as the real one. He seems to be there only to arrest the speedy flow of work in a Commissionerate.

Circular No. 23/2009 - Cus Dated 31st August, 2009

Jurisprudentiol – Thursday's cases

Central Excise

Law does not provide for an appeal against self assessment – if this be so, refund claim sanctioned is proper – Stay of recovery ordered by CESTAT

THE assessee was paying Central Excise duty on a monthly basis in terms of Rule 8 of the CER, 2002. Although the duty payable on each invoice was shown correctly, there was an arithmetic mistake in totalling the assessable value for the entire month of September, 2007. Duty was paid on the erroneous total of assessable value of Rs.72,82,301/- whereas the correct amount should have been Rs.70,30,727/-. This error went un-noticed while filing the ER-1. At the time of reconciliation, this slip-up was detected.

Income Tax

India-Singapore DTAA - non-resident claims exports benefits - Sec 80HHC clearly mandates that such benefits cannot be granted to non-resident - even provisions of DTAA cannot oblige India to grant such deduction on ground of non-discrimination: ITAT

THE ruling of Advance Ruling is binding on the parties under Sec 245S. But here is a case where the assessee who is a non-resident has gone in appeal against the Revenue for denial of Sec 80HHC benefits. And the final verdict of the Tribunal is that Section 80HHC clearly mandates that deduction under this section cannot be granted to non-residents. Clause (4)(a) of the non-discrimination clause of Article 26 of the Double Taxation Avoidance Agreement between India and Singapore clearly provides that the said Article cannot oblige India to grant such deduction to the assessee, being resident of Singapore.

Service Tax

Delayed Payment of Tax – No reason submitted for delay – Penalty rightly imposed - vivid reasoning and great clarity of Appellate Commissioner appreciated – CESTAT

The tax returns were filed and the tax paid only after the default was pointed out by the department. No reason whatsoever has been stated by the appellant for the delay in filing returns and paying tax, nor even any relief under section 80 of the Act has been prayed for in this appeal. As a matter of fact, the assessee submitted before the lower appellate authority that penalty under section 76 was mandatory but could be reduced if sufficient cause was shown. In this connection, case law was also cited. Tribunal found that these arguments were considered by the lower appellate authority and, on this basis, the penalty imposed by the original authority under section 78 was vacated. The penalties under sections 76 and 77 were rightly maintained.

FERA

Seizure of foreign Currency from the Ashram when its head was in jail – Burden of proof still lies with him – conviction upheld: Madras HC

In the case of socio - economic offences, presumption under the strict liability theory would be more. A plain reading of those provisions would evince and exemplify that if there are certain facts within the exclusive knowledge of the accused and once the burden as per Section 71 of the FERA Act is on him to explain, certainly, he must explain himself.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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