Retrospective amendments – The Good, Bad and Ugly …

By TIOL News Service

NEW DELHI, FEB 26, 2010: LIKE every year Budget, this year also the Finance Bill contained proposals for retrospective amendments.

The Good:

Rule 57CC and Rule 6 of the CENVAT Credit Rules are proposed to be amended retrospectively to allow the manufactures of dutiable and exempted goods to reverse the Credit attributable to the exempted goods. The corresponding rules are proposed to be amended retrospectively with effect from 1.9.1996 to the effect that where dutiable and exempted goods are manufactured, the assessee can pay the amount of credit attributable to the inputs (and input services with effect from 10.09.2004 used in the manufacture of exempted goods along with interest of 24%. Within six months from the date of assent of the Finance Bill, he shall make an application to the Commissioner with documentary evidence and a certificate from the Chartered Accountant or Cost Accountant certifying the amount paid. On receipt of the confirmation of the correctness of the amount from the Commissioner, the amount shall be paid within a period of 10 days from the date of receipt.

The Bad:

An explanation is proposed to be inserted in sub-clause (zzc), of clause 105 of Section of 65 of the Finance Act, 1994 with effect from 1st July, 2003:

‘Explanation.—For the removal of doubts, it is hereby declared that the expression “commercial training or coaching centre” occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression “commercial training or coaching” shall be construed accordingly.

There are a good number of decisions wherein the demand of service tax on commercial coaching or training has been set aside on the ground that the institutes offering the coaching are not commercial. Now even a trust or society if imparts training for a consideration has to pay service tax from 1st July 2003. Retrospective amendment to undo Tribunal judgements?

The Ugly:

The worst fears of the trade in respect of a possible retrospective legislation have come true. After the High Court  has set aside the levy of service tax on Renting of immovable property in Home Solution Retail India case – 2009-TIOL-196-HC-DEL-ST, the relief to the tax payers only short lived with the Board making its intentions clear by instructing the field to collect the tax even after the HC ruling. Now it is official as the law is going to be amended retrospectively to undo the HC ruling.