MVAT ACT UPDATES

MVAT
RecentNotification
Notification He Commissioner of Sales Tax has issued Notification under section 8(2)(a) of ProfessionTaxAct,1975dt.3062010bywhichthedateforpaymentofprofession taxbypersonsenrolledupto3152010fortheyear201011isextendedfrom306 2010to3172010. Circulars (a) The Commissioner of Sales Tax has issued Circular No.19T of 2010 dt. 236 2010bywhichtheinformationaboutperiodicityoffilingofreturnsfor201011 isgiven. (b) The Commissioner of Sales Tax has issued Circular No.20T of 2010 dt. 306 2010bywhichtheapplicabilityoftheHonbleSupremeCourtjudgmentincase ofPeeVeeTextilesunderBSTAct,1959isclarified. Notification The Government of Maharashtra has issued Notification u/s.42 (3A) of the MVAT Actdated9.7.2010.Bythisnotificationthecompositionschemeof1%applicableto builders/developers is notified. The scheme is operative from 1.4.2010 subject to conditionsasgiveninthenotification.
MaharashtraValueAddedTaxAct,2002
Notifications a) TheGovernmentofMaharashtrahasissuedNotificationundersection41(1) oftheMVATAct,2002bywhich
EZINE August, September 2010
earliernotificationdated5.11.2009isamendedand subentry(i)isaddedinentry2.Bythisamendment VATrefundisalsomadeeligibletotheBritishDeputy HighCommissionsinMumbai,subjecttocertainconditions. b) TheGovernmentofMaharashtrahasissuedNotificationdated28.7.2010 underRule45AofMVATRules,2005wherebytheEpaymentrequirement ismadeapplicabletothedealersfilingquarterlyreturns,effectivefrom 1.10.2010 MaharashtraLuxuryTaxAct,1987 (i) TheGovernmentofMaharashtrahasissuedNotificationundersection22(1) oftheLuxuryTaxActdated26.7.2010wherebytheentry12relatingto Franceisdeleted.
IncidenceandlevyoftaxinMVATAct
1.WhatisVAT? MVATAct,2002,hasbeenintroducedinthestateofMaharashtraw.e.f.01042005. Asthenamesuggests,VATi.e.ValueAddedTaxisataxuponeveryvalueaddition. Prior to 01042005, Maharashtra had first stage singlepoint levy system of taxationimplementedthroughtheBombaySalesTaxAct,1959.Underthatsystem, only manufacturers and importers were required to pay the tax on the first sale takingplaceinthestate.Asagainstthis,VATsystemcontemplatestaxateverystage in the entire chain of transactions relating to the same goods. The concept has become quite familiar with our fellow brothers and need not be explained further with the help of examples etc. Suffice it to say, VAT is leviable on each sale happeninginrespectofthesamegoods. A question frequently is asked whether positive value addition at every stage is necessarily required under VAT. The scheme of MVAT Act, 2002, does not require such value addition at every stage. Even if the seller sells the goods at cost price, without adding any margin for his expenses or profit etc., VAT is leviable on that sale. Value addition also does not mean enhancement of the intrinsic value of the goods.Togiveanexample,Apurchasesmotorcarandfitsaccessoriesthereinlike
airconditioner,musicsystemetc.Inthiscase,thereispositivevalueadditiontothe intrinsicvalueofthegoodsandVATiscertainlyapplicableonthesaleofsuchmotor car. In another case, A purchases the said motor car and sells in the same condition withoutanyrefurbishment.Inthatcasetoo,VATispayableonthesaleofsuchcar althoughthereisnovalueadditionmadebythesellertherein. Valueadditioncanalsobeinthenatureofexpensesincurredontheprocurementof thegoodsandmarketingthereofwithoutaddinganythingintotheintrinsicvalueof thegoodssuchassellingexpenses,advertisingexpenses,transportetc.Eveninsuch cases,VATisapplicableonthesaleofsuchgoods. Anotherfrequentqueryisinrespectofthecasewheregoodsaresoldataloss.In thatcasetoo,VATisapplicableonthesalepricealthoughoffsettingthepurchasetax against such sales tax may result into a refund. There is no express prohibition underMVATActtoclaimrefundinsuchcases. 2.Incidenceoftax Thechargingsectioniscontainedinsection4whichreadsasunder: SubjecttotheprovisionsofthisActandrules,thereshallbepaidbyeverydealer or,asthecasemaybe,everyperson,whoisliabletopaytaxunderthisAct,thetax ortaxesleviableinaccordancewiththeprovisionsofthisActandrules. Thus,itisclearthateverydealer/personwhoisliabletopaytaxisrequiredtopay taxesinaccordancewiththeprovisionsoftheActandrules.Thetermpersonliable topaytaxhasnotbeenexpresslydefinedundertheAct.However,consideringthe provisionsofsection3,4,5and6collectively,onecaninferthatVATispayableonly onthesalesofgoodswherethethresholdlimitofturnoverofsalesiscrossedbythe dealer.ItispertinenttonotethatthereisnoprovisionforpurchasetaxunderMVAT Act. 2.1.DealersRegisteredunderEarlierLaws: Section 3(1) of the MVAT Act makes it clear that dealers already registered under theerstwhileBSTActwouldautomaticallybetreatedasregisteredunderMVATAct w.e.f. 01042005. In fact, the registration certificate under BST Act continued till 31032006andnewTINcertificateswereallottedtothedealersw.e.f.01042006. 2.2.DealersLiabletoPayTaxinthePrecedingYear:
There is another category of dealers who may not have been registered under the BST Act prior to 01042005 for whatever reason, but their turnover of sales or purchaseshaveexceededthethresholdlimitasprescribedundersection3(4)ofthe MVATActduringtheimmediatelyprecedingyear.Inotherwords,thedealerbeing an importer, whose turnover of sales or purchases exceeded Rs. 1,00,000/ in the F.Y. 200405 or a dealer other than an importer whose turnover of sales or purchasesexceededRs.5,00,000/inF.Y.200405arethedealersliabletopaytax from the appointed day i.e. 01042005. Such dealers are required to obtain registration certificate and pay the tax w.e.f. 01042005 irrespective of their turnoverintheyear200506. 3.RegistrationLiability: Section3(4)prescribesthelimitsofturnoverofsalesforthepurposeofattracting registration liability. It must be borne in mind that it is only the turnover of sales whichhastobecomputedforthispurposeandnottheturnoverofpurchases.The saidlimitsareasunder: CategoryOfDealer LimitOfTurnoverOf OtherConditions Sales Importer Rs.1,00,000/ Value of taxable goods sold or purchased during the year is not less than Rs. 10,000/ Others Rs.5,00,000/ Value of taxable goods sold or purchased during the year is not less than Rs. 10,000/ Importer,here, means as defined u/s. 2(13) and is a dealer who brings any goods intothestateortowhomanygoodsaredispatchedfromanyplaceoutsidethestate. Thus,hecanbeadealerwhoreceivesthegoodsfromotherstateseitherbywayof stocktransfersorbywayofinterstatepurchasesorbyimportingthegoodsfroma foreign country. The condition of minimum value of imported goods is conspicuously absent in this section as compared to the corresponding section under the BST Act. Therefore, a dealer who is an importer in the sense described above,evenforanegligibleamount,wouldbeliableforregistrationifhisturnover ofsalesexceedsRs.1,00,000/. TheconditionregardingsaleorpurchaseoftaxablegoodsworthRs.10,000/also hastobecomplied.Ifadealeriswhollydealingintaxfreegoods,thenhedoesnot attracttheregistrationliability.
4.Interpretations: Section3(5)isinthenatureofanexplanationsinceitexplainsthemeaningofthe termturnoverofsales. 4.1. Clause (a) of section 3(5) stipulates that turnover of sales will be considered whetherthegoodsaretaxableornot.Itmeansthat,forthepurposeofcomputing the turnover limit of, say, Rs. 5,00,000/, sales of taxfree goods will also be considered. 4.2.Clause(b)referstothecomputationofturnoverofanagent.Itexplainsthatthe salesmadebysuchagentonhisownaccountaswellasonbehalfofhisprincipals, whetherdisclosedornot,willhavetobecounted.Thissubsectionisbasedupona principlethatprincipalandagentsarejointlyandseverallyliabletopaytaxunder theAct. 4.3. Clause (c) deals with the case of an auctioneer who has been categorically includedinthedefinitionofdealeru/s.2(8).Thelegislaturehastakencaretosee thatevenanauctioneerwhoorganisestheauctionwithouttakingthepossessionor custody of the goods at any point of time, and without having any authority to transferthetitleinthegoods.Thisclauseismadewiderthatitscounterpartunder theBSTActandhasbeenintroducedtoovercometheratioofthejudgmentinthe case of M/s. Ashwin & Co. (Appeal No. 35 of 1994) decided on 25012002. However,ithastobeborneinmindthattheturnoverofsaleswillbecountedinthe handsofanauctioneeronlywhenhereceivesthepriceofthegoodsonbehalfofhis principal.Inotherwords,theturnoverofsaleswillnotbeaccountedinthehandsof an auctioneer when the sale price is directly paid to the principal or his nominee and the auctioneer merely organises the auction by bringing the seller and buyer togetheralthough,heistreatedasadealerbyvirtueofhisactivity. 4.4. Clause (d) deals with an agent of a nonresident dealer. Such agent has to computethesalesturnoverofhisownaswellasthateffectedonbehalfofhisnon residentdealerandalsotheturnovereffectedbysuchnonresidentdealerdirectly. In other words, the sales effected by the nonresident dealer within the state withoutthehelpoftheagentalsoneedtobecountedinthesalesturnoverforthe purposeofcomputingthethresholdlimitofturnoveru/s.3(4). 4.5. It is provided u/s. 3(6) that various kinds of agents such as factor, broker, commissionagent,delcredereagentoranyothermercantileagentorauctioneeror agentofanonresidentdealerareliabletopaytaxundertheActwhetherornottheir principalisadealerandwhetherornotsuchprincipalisliabletopaytaxunderthis Act and whether or not such principal is disclosed. Thus, to give an example, an agent who effects sales on behalf of the principal who is an individual and not a
dealer, is liable to pay tax under the Act, although such individual may not be a dealerundertheprovisionsoftheAct. 4.6. An important deviation has been made under the MVAT Act in respect of the dealers who are only liable to pay tax under CST Act and do not attract the registrationliabilityunderMVATAct.Priorto20062006,subsection(7)ofsection 3providedfortheliabilityofsuchperson.TheregistrationliabilityunderCSTActis attractedwhen a dealermakes an interstate sale of whatever amount.There is no minimumthresholdturnoverlimitunderCSTAct.TheprovisionsundertheBSTAct madesuchdealersliabletopaytaxunderBSTActalthoughtheyneverexceededthe minimumturnoverlimitunderthatAct.However,undertheMVATAct,suchdealers are not liable to pay tax unless they cross the minimum turnover limit attracting registrationundertheAct.Togiveanexample,adealermayeffectinterstatesales worthRs.50,000/inafinancialyearandalsolocalsalesworthRs.50,000/.Heis liableunderCSTActandhastoobtainregistrationunderit.However,heisnotliable under the MVAT Act since the minimum prescribed limit of turnover of Rs. 5,00,000/ is not attained by him. In such a case, he is not liable to pay tax on his localsalesbyvirtueofdeletionofthisprovisionw.e.f.20062006. 5.Deductionofthefirstturnoveru/s.3(2): The proviso u/s. 3(2) provides that the dealer shall not be liable to pay tax in respectofsuchsalesastakeplaceduringtheperiodcommencingonthefirstdayof April of the financial year till his turnover of sales does not exceed the relevant limit applicable to him under subsection (4). The expression does not exceed indicates that the dealer is able to claim the exemption till the point, he does not cross the prescribed limit. This can be explained with the help of an example. A dealerhaseffectedsalesthrough10invoicesandsumtotalofthefirst9invoicesis Rs. 4,50,000/ and the 10th invoice is worth Rs. 75,000/. In this case, he exceeds theturnoverlimitofRs.5,00,000/throughthe10thinvoice.However,hewillget theexemptiononlyinrespectoftheturnoveroffirst9invoices.Inabsenceofthe expression does not exceed he could have claimed the exemption for all the 10 invoices.Inanextremeexamplewherethefirstinvoiceitselfexceedsthethreshold turnoverlimit,thedealerdoesnotgetanyexemptionatall. 6.Liabilitytillthecancellationofregistration: Section3(3)providesforcontinuationofliabilityuntiltheregistrationcertificateis dulycancelled.Itmeansthattheregistrationobtainedwronglywillalsocontinueto beoperativeuntilitisdulycancelled.Apersoncannothaveadefenceontheground that he was not liable to obtain registration by virtue of not being a dealer. The grounds for cancellation also need to be checked in this respect in section 16(6)
r/w.Rule11.Theregistrationcertificatecanbecancelledontwogroundsviz.upon transferordiscontinuanceofbusinessandnotexceedingtheturnoverlimitduring the previous year. In the first case, the cancellation is compulsory whereas in the secondcase,itisvoluntary.Apersonwhohaserroneouslyobtainedtheregistration certificatewillhavetogetitcancelledonthegroundthathewasnotliabletoobtain theregistrationatall.However,suchcancellationwillhavetobedoneprospectively andhewillbeheldliabletotaxinrespectoftheturnoverofsalesuntilthedateof cancellationbyvirtueofthissection3(3). 7.BusinessandDealer: Thesetwodefinitionsareofutmostimportancetodecidetheincidenceoftax.They aredefinedu/s.2(4)and2(8)respectively.Businessiddefinedinamuchbroader wayundertheMVATActascomparedtotheBSTAct.Itincludesanyserviceaswell. However,onlysuchservicesarecoveredwhicharenotifiedbythestategovernment in an official gazette by virtue of the definition of service u/s. 2(27). There is no such notification issued so far. An interesting question may arise where a fully serviceorientedorganisationwhichmightsellcapitalassetsduringthecourseofits activity.Whethersuchsaleswillbeliabletotaxasinthecourseofbusiness? TheHonbleTribunalhasansweredthisquestioninthecaseofM/s.ZenithGlobal Pvt. Ltd. (SA No. 1026 to 1029 of 2001 dtd. 31012002) where it was held that purchases of fixed assets and other purchases while engaged in consultancy businessareoutsidethepurviewofbusinessasdefinedinsection2(5A)oftheBST Act.ThiscaseisunderBSTActandthewiderdefinitionofbusinessunderMVATAct isnotconsideredhere.However,sincenoservicesarenotifiedasyet,afullyservice orientedorganizationcannotbeconstruedascarryingonbusinessandhence,sales ofobsolete/oldcapitalassetscannotbetreatedassalesliabletotax. Under the definition of dealer, certain persons, bodies or entities are treated as deemeddealersquatheiractivityofsellinganygoodssuchasscrap,unserviceable items,capitalassets,etc.Examplesarecustomsdepartment,centralgovernmentor stategovernmentdepartments,localauthoritiesetc.Publiccharitabletrusthasalso beenincludedunderthisdefinitionostensiblytooverridetheeffectoftheSupreme CourtjudgementinthecaseofCommissionerofSalesTaxvs.SaiPublicationFund (126 STC 288). In this case, the said trust was selling books and other items to spread the message of Sai Baba to devotees.The activity was not heldas business lookingtotheobjectivesofthetrust.Byspecificinclusionofpubliccharitabletrusts in the definition of dealer, it is now possible to take a view that the sales of any goods incidental to the charitable objectives of the trust are in the course of business.ItisalsoworthwhiletorefertothecaseofShreeMahilaGrihaUdyogLijjat Papad(SANo.1108of1995dtd.15122006).Theobjectofthetrustwastoraise
thestandardoflivingofwomeninvolvedinmakingpapad.Thesalesofpapadare just incidental to the main objective and hence the activity was not construed as business. Thus,thetransactionsofsaleorpurchaseofcapitalassetspertainingtothebusiness have to be treated as liable to tax and one cannot take a view that they are not effectedinthecourseofbusinesssincethemainactivityofbusinessrelatestosome othergoods. Apartnerofafirmbringinginacapitalassetlikemotorcarashiscapitalcannotbe termedaspurchaseofthefirm.Similarly,appropriationofthecapitalassetstothe accountsoftheindividualpartnersatthetimeofdissolutionofthefirmalsocannot be construed as sales of such capital assets. Ref. Recent Bombay High Court judgment in the case of M/s. Synthetic Suppliers (STA 8 of 2003 in Reference applicationNo.34of1998decidedon06052010). The definition of business specifically excludes the profit motive and any activity whichorwithoutprofitmotivecanbetermedasbusinessprovidedithasallother ingredientsnecessaryforthesame. 8.Voluntaryregistration: The MVAT Act provides for voluntary registration upon a deposit of Rs. 25,000/ adjustabletowardstaxliabilityshowninthereturns.Suchregistrationisobtained withoutexceedingtheturnoverlimit.Thedealerbecomesliabletopaytaxfromthe date of registration irrespective of his turnover and he is not eligible for the first turnover exemption u/s. 3(2). Proviso u/s. 16(6) provides that the Commissioner maycanceltheregistrationcertificategrantedvoluntarilyinacasewherethedealer has not commenced the business within six months from the date of registration. Therefore,suchdealershavetoensurethatbusinessisstartedwithinaperiodofsix monthswhenvoluntaryregistrationisobtainedinanticipation. 9.Levyoftaxasperschedules: The VAT is levied on the sales of goods at the rate specified in column (2) of schedulesB,C,DorE.ScheduleEisaresiduaryentryandthegoodswhicharenot specifiedanywhereintheotherschedulesareincludedinthisentryandtherateof taxis12.5%.ScheduleAcontainsalltaxfreegoods.ScheduleBcontainsjewellery, precious/semipreciousstonesliableat1%.ScheduleCcomprisesofgoodsliableto tax at 5% w.e.f. 01052010. Schedule D comprises of motor spirits, petroleum products and liquor liable to tax at higher rates. The turnover of sales has to be classifiedaccordinglyandsubjectedtotaxatappropriaterates.
10.Conclusion: In nutshell, it can be stated that a person effecting sales has to ascertain that whether he is doing so in the capacity of a dealer having regard to the frequency, continuity, regularity, volume etc. of the transactions. Refer Supreme Court judgmentinthecaseofStateofGujaratvs.RaipurManufacturingCo.Ltd.(19STC1). Onceitisestablishedthatheisadealercarryingonabusinesshavingregardtothe peculiardefinitionsofthetermsundertheMVATAct,hehastoascertainthetotal turnover of sales so as to determine his registration liability. The incidence of tax will be on the transactions of sales effected during the course of business by the dealer and not otherwise. The liability of tax has to be discharged taking into considerationtheratesoftaxasperschedules.AlthoughtheActnowhereconfersan expressrighttocollectthetaxesfromthebuyers,thereisnoprohibitiontorecover the taxes form the buyers as well. Considering all the provisions of the Act harmoniously, it can be concluded that the dealer can collect the taxes separately throughtheinvoicesonlyequaltohisliabilityoftaxonthesaidtransaction.
AnylysisofImportantCaseLaws
InterstatestocktransfersFformsufficiencyofevidence Interstatemovementofgoodsonaccountoftransactionofsaleistaxableunderthe CentralSalesTaxAct,1956(CSTAct).Section3(a)oftheCSTActprovidesthatthe transaction of sales which occasions the movement of goods from one state to anotherwillbeconsideredasinterstatesales.Thus,theoccasioningofmovementas aconsequenceoronaccountoftransactionofsalesfromonestatetoanotherwill decidethecharacterofthetransactiontobealocalsaleoraninterstatesale. Section6AoftheCSTActprovidesthatifthemovementofthegoodsfromonestate to another is otherwise than a transaction of sales then it would be exempt from CST.Ofcourse,theclaimantdealer/sellerwillhavetoproducedeclarationinForm Ftoavailsuchexemption.Thisexemptionunder6Aisnormallyunderstoodinthe trade as interstate stock transfer / consignment transfer. Since the claim of transaction as interstate stock transfer does not attract any CST, the Revenue without any exception, of all state and Union Territory have been examining the claim very thoroughly as to find out as to whether the movement is on account of transactionofsaleornot.Moreover,thetransactionissupportedbydeclarationin
formFandthattheevidence/burdenofproofthatthegoodsaremovedoutsidethe state otherwise on account of sale is proved by the dealer claiming such deductions.ThisdeductionhasbeensubjecttolotoflitigationtilltheApexCourt. In this note, limited issue in respect of the goods transfer to a branch / agent situatedoutsidethestateanditssubsequentsalebythebranch/agentinadayor twoofreceiptasalsotheevidencevalueofthedeclarationisdiscussed. Asnarratedabove,iftheinterstatemovementofgoodsistomeetanexistingorder for sale, one may be in a position to infer that the interstate movement has occasioned on account of transaction of sales and accordingly such movement of goods is taxable under the CST Act and even if the dealer has claimed branch / consignment agent transfer, form F is produced, still such transactions could be regardedastaxableinterstatesales.Recently,theMadrasHighCourtinThestateof TamilNaduvs.CoimbatorePioneerRollingMills(30:VST:524)(2010)heldthatjust because the goods received by the branch was sold in a couple of days does not necessarilyprovethatthetransactioniscoveredbysection3(a)oftheCSTActand is taxable in the state from where the movement occasioned. In the Coimbatores case (cited supra) the assessee has proved that the declaration made in Form F under section 6A is true and in support of its declaration he has also produced various materials. The Revenue, has not alleged / proved that the Declaration in Form F is not true, genuine and based upon false representation. The High Court held that in the absence of any incriminating material contrary to the particulars provided by the assessee the assessing officer cannot hold the declaration given underformFisnotcorrect. Thecourtobserved Thefindingstothecontrarybytheassessingofficermustbeborneoutbyrecords andevidencebutnotonmerespeculationandsurmises. TheHighCourtalsorelieduponotherMadrasHighCourtDecisionsin(95:STC:273) & (96:STC:98) to reiterate that the claimant dealer is to prove that the particulars mentionedinFormFaretrue.TheHonbleHighCourtalsoreliedonthedecisionof the Karnataka High court in the case of M/s. Jindal Aluminium Ltd (126:STC:458) whereintheHighCourthasheldthatthemeresaletransactioneffectedbytheagent on the very same day of the arrival in itsself cannot be the sole basis to treat the sameasinterstatesale. AveryrecentBombayHighCourtDecisioninthecaseofM/sKillickNixonLtdvsthe State of Maharashtra (Sales Tax Reference No.1 of 2003 dt. 6.5.2010) (unquoated decision)theBombayHighCourtwascalledupontoadjudicatethecasewherethe
assessment under the CST Act was final (no appeal pending) & while passing the order under the Bombay Sales Tax Act, the appellate authority reopened the proceedingsundertheCSTActtodisallowtheclaimofstocktransfer.TheHonble CourtnotedtheobservationsoftheSupremeCourtdecisionincaseofM/s.Ashok Leyland Ltd 134:STC:473 (SC) wherein the apex court has held that once the assessingauthorityacceptformFandhasheldthetransactionasbranchtransfer,i.e finalandnorevisioncanlieagainstthesame. Para61ofthesaidSupremeCourtdecision(134:STC:473)readsasunder: 61.Inthecaseathandithastobedeterminedwhetherthesaleinquestionisan interStateone.Ifthroughthemeansofalegalfictionitisdeterminedthatthisisnot aninterStatesale,thenitamountstoatransferofstock.Thisfindingismadebya statutory authority who has the jurisdiction to do so and there is no provision for appeal.Therefore,theordermadebysuchauthorityisconclusiveinthatitcannot be reopened on the basis that there had been a mere error of judgment. It also cannot be reopened under another statute, for examples, the Sales Tax Act of the Stateconcerned,whentheorderhadbeenmadeundertheCentralAct.Section9(2) of the Act is subject to the other provisions of the Act which would include sub section(2)ofsection6AoftheAct."Subjectto"isanexpressionwherebylimitation isexpressed.Theorderisconclusiveforallpurposes.Itcanonlybereopenedona smallsetofgroundssuchasfraud,misrepresentation,collusion,etc. TheSupremeCourtalsoheld...... Discovery of new material although it may fall the ground, by itself may not be a ground for reopening the proceedings unless by reason of such discovery it turns outthejurisdictionalerrorhadbeencommitted. In view of these observations one may be able to make out the case that the interstatemovementisonaccountoftransactionotherwisethanasale. ERPPackages: In a majority of the integrated software system / ERP packages the head office / controllingofficenormallymonitorsthestockpositionatdifferentlocationsacross thecounty.Thesoftwareinsuchcases,autogeneratesindent/stocktransferadvice based on the reorder level or shortage of stock at a particular location. In such a case,thestockismovedfromonelocationtootherlocationinadifferentstateand on receipt of the goods, the receiving godown may arrange for sale / despatches therefrom.Insuchcases,manyatimesithappensthatthesubsequentsalehappens inacoupleofdaysfromthedateofreceipt.TocounterthestandoftheRevenuethat
theinterstatemovementissaleandnotastocktransfer,besidestherelianceonthe Coimbatores case, one may argue that the system has auto generated the stock transferadvise to replenish the stock.Moreover,the quantities despatched is ofa economic size of batch which is the standard practise and hence cannot be construedasinterstatesales. ItisobservedthattheRevenuebasedonpeculiarfactsofeachofcase,mayraisethe issue of movement of customised goods, madetoorder goods, combination / configuration of different materials etc. However, for standardised goods the observationoftheSupremeCourtasalsoBombay&otherHighCourtswouldsurely helptoenabletoclaimundersection6AoftheCSTAct.
RegistrationunderMVATAct
WHYTOOBTAINREGISTRATIONCERTIFICATE? 1Obtainingofregistrationcertificateisstatutoryobligationofeverydealer,whois liabletopaytaxundertheAct. 2Itempowersthedealertocollecttax. 3Aregistereddealergetsthebenefitsofsetoff(inputtaxcredit) 4Businesswithoutregistrationinvitespenalty/prosecution. 5Nobodywouldliketobuygoodsfromunregistereddealer. Whoshouldapplyfortheregistration? The dealer who attains or crosses prescribed turnover of purchase or sale should apply for registration under VAT Act within 30 days from the date on which turnovercrossedtheprescribedlimit. Note: Once a dealer exceeds the prescribed turnover and fulfils the conditions as mentionedintablebelow,thentheliabilitytopaytaxesundertheActcommences fromthetimeoftransactionbywhichtheturnoverexceedstheprescribedlimit. Whathappensifnotappliedintimeforregistration? When a dealer does not apply within 30/ 60 days from the date of exceeding the prescribed turnover of purchases or sales than certificate of registration will be issuedwitheffectfromthedateofuploadingoftheapplication.Therefore,fromthe
date of starting of business till the date of uploading of the application, the dealer willbetreatedasunregistered. ProvisionsofPenaltyforunregistereddealers: Ifdealerdoesnotapplyintimeandremainsunregistered,itisanoffenceunderthe Act. BenefitsofRegistration: i.Hecanclaimsetoffoftaxpaidonthepurchaseifeligibletogetany. ii.HecanissuevariousdeclarationsprescribedC.S.T.ActslikeFormCetc. iii. Registereddealersarepreferredwhileawardingthegovernmentcontracts.The abovementionedbenefitsaredeniedtoanunregistereddealer. Disadvantagesofnonregistration: 1Unregistereddealerisliabletopaytaxonthesalesaffectedbyhimbuthe cannotcollecttax. 2Hecannotclaimanysetofforrefundofthetaxpaidbyhim. 3Purchasesatconcessionalrateoftaxnotavailabletohim.Hecannotissue formsordeclarationslikeFormCetc. 4Noauthenticityinthemarketasmajorityofdealerspurchasesgoodsfrom registereddealersonly. 5Possibilitiesofnonconsiderationforawardingthegovernmentcontract. 6Impositionofpenaltyandprosecutionforremainingunregistered. REGISTRATION&PROCEDURALASPECTS. TURNOVERLIMITSFORREGISTRATIONSECTION3(2)&3(4): CLASSOFDEALER TURNOVER OF SALES TO EXCEED Importer Sale or purchase of taxable Rs.1,00,000 goodsshouldbe Rs.10,000ormore. Others (including manufacturers and Rs.5,00,000 resellers) Sale or purchase of taxable goodsshouldbeRs.10,000ormore. Section3(5)Followingitemsspecificallycoveredforregistration Limits:
aTurnoverofallitems,whethertaxableortaxfreeistobeconsidered. bToincludeturnoveronownaccountaswellasonaccountsofprincipal,whether disclosedornot. cIncaseofauctioneerturnovershouldincludeturnoverofgoods,priceofwhichis receivedbyhim. dIncaseofagentofnonresidentdealer,salesofsuchnonresidentdealer. aSection3(8)containsprovisionstomakesuccessorinbusinessliabletotax. b ChangeinconstitutionorchangeinownershipTimelimitforapplicationis30 days. cChangeinownershipduetodeathTimelimitis60days. d Section3(9)DealersundervoluntaryregistrationschemeNoBasicdeduction liablefromdateofregistration. FEESFORREGISTRATION: Under Voluntary Registration Scheme (VRS): Registration fees of Rs. 5,000/ is requiredforVATTINandRs.25forCSTTIN.Witheffectfrom16082007,dealer applyingunderVRSisalsorequiredtodepositRs.25,000asanadvancepaymentof tax[provisotoSection16(2)].Suchadvancepaymentoftaxcanbeadjustedagainst taxliability,interestorpenaltyforfirstandsecondfinancialyear. NewRegistrationincaseofShiftingofBusiness: NewRegistrationCertificatewasrequiredonshiftingofplaceofbusiness,ifplaceof businessisshiftedfromonepincodenumbertootherpincodenumber.However, from 162006 change of place of business does not require new registration. An application on letterhead along with proofs of new address is sufficient. An applicationisrequiredtobemadetotheregistrationbranchwithinthejurisdiction ofnewplaceofbusiness.TINwillremainthesame.Anewprovisohasbeeninserted inSection16(6)whichempowersthedepartmenttocanceltheregistrationgranted toadealerwhohasoptedforvoluntaryregistration,ifthedepartmentissatisfied, aftergivingthedealerareasonableopportunityofbeingheard,thatthepersonhas notcommencedbusinesswithinsixmonthsfromthedateofregistration. NewRegistrationwhenchangeofConstitution: New registration certificate is required if there is a change in constitution of business, for eg. Change in constitution from partnership to proprietorship or proprietorshiptoPrivateLimitedCo.etc.Applicationistobemadewithin30days fromthedateofchange.
AdvantagesofCentralSalesTaxRegistration: A dealer registered under C.S.T Act can purchase goods from outside the state of Maharashtraataconcessionalrateoftax@2%againstdeclarationinForm`C'. SchemeofVoluntaryRegistration: Certificate of registration can be obtained without exceeding the turnover limit as per voluntary registration Scheme. However fees of Rs. 5000/ and an advance paymentofRs.25,000/ispayableinsuchcase.Suchpaymentistobemadeinby wayofhandingovertheDemandDraftorPayOrderalongwithchalaninForm210 totheregistrationofficer.Demanddraftorpayorderisrequiredtobepreparedin favourofBankofMaharashtraA/c.MVATincaseofMumbairegionandState BankofIndiaA/c.MVATforotherregions. ImportantPointstoRemember: i. Any dealer having more than one place of business in different locations within the State is required to make a single application in respect of all suchplaces. ii. Whenever dealer adds any other place of business or goes down etc. he hastoinformtheregistrationbranchaboutitwithin60daysandgethis registrationcertificateamendedtothateffect.Thereisnospecificformfor makinganapplicationforamendmentinTINcertificate.Anapplicationon letterheadalongwiththespecifiedproofofadditionissufficient. iii. When dealer starts dealing in different commodities which are not mentioned in registration certificate, he should inform the registration branchaboutitwithin60daysandgethisTINcertificateamendedtothat effect. iv. Any dealer opening a new place of business is entitled to get additional copyofTINcertificateatnoextracost. v. Every dealer is required to furnish a declaration stating the name of the personwhoshallbedeemedtobeManagerinrelationtothebusinessin theStateofMaharashtra. WHENANDWHERETOAPPLY?
Onexceedingthelimitoftheturnoverofsalesorpurchase,adealerbecomesliable for registration certificate. An application is to be made in Form 101 (Under VAT Act) and Form a (Under C.S.T. Act) before registration branch within 30 days of exceedingtheprescribedturnover. RREQUIREMENTSFORVATREGISTRATION 1 Two passport size recent photographs of proprietor/ any one partner or director. Such partner/ director or proprietor is required to attend before the registration officer for photo signature. Proprietor or director can appoint some otherpersonasapowerofattorneytoattendbeforetheregistrationofficeronhis behalf. 2 Partnership Deed in case of partnership firm and Memorandum & Articles, in caseofcompany. 3Rentreceiptorelectricbill&copythereofofplaceofbusiness&consentletterof theowneriftherentreceiptorelectricitybillisnotinthenameoffirm,companyor proprietor. 4 Rent receipt or electric bill & copy thereof of residence of all partners or directorsorproprietorandconsentletteroftheowner,ifrentreceiptorelectricity billisnotinthenameofthepartnerordirectororproprietor. 5Rationcardsofallpartners/director/proprietorwithphotocopyoffirstandlast pages. 6BooksofAccount.(Cashbook,Ledger,PurchaseandSaleRegisterandpurchase andsalesbills),incaseofcompulsoryregistration. 7Statementofpurchaseandsaleswithdate,BillNo.,nameandaddressofparties, Registrationnumber,nameofitemandamount.Bifurcationofpurchaseintotaxfree purchase,taxablepurchase,taxamount,interstatepurchase. 8Letterofauthoritydulysigned. 9Rentreceiptandconsentletterforadditionalplaceorgodown. 10Detailofbankaccountoffirm/company/proprietaryconcern. 11Professiontaxenrolmentnumberofproprietororallpartnersordirectorsand company. 12Professiontaxregistrationnumberoffirm,companyorproprietaryconcern,if salarypaidtoemployeesexceedprescribedlimit. 13ApplicationforcancellationofexistingTINincaseofchangeinconstitutionor changeinownership. 14ProofofIncometaxnumberofproprietororfirmandallpartnersorcompany andalldirectorsalongwiththeproof. NOTE: All the above requirements are required in original and photocopies. Photocopiesaretobesubmittedalongwithanapplicationform.Thesamearekept onrecord.Originalsaretobeshownatthetimeofhearing.
CHANGEINBUSINESS(SECTION18)INFORMATIONTOBEFURNISHED Sec. 16(9) & Sec 18 of the Act requires dealer to furnish information regarding: 1Saleordisposalofhisbusinessoranypartthereoforanychangeinownership thereof. 2Closureofbusinessoropeningorclosingofanyplaceofbusiness. 3Changeinthenatureornameofbusiness. 4Inthecaseofmanufacturer,changeintheclassofgoodssoldorboughtbyhim. 5Enteringintopartnershiporotherassociation. 6 Holding or application for the grant of patent or trade mark in respect of any goods,methodetc.orbecomesentitledtouseanypatentortrademark. 7Openingorclosingofbankaccountsofbusiness. Suchinformationistobefurnishedtotheregistrationofficerwithin60daysfrom thedateofsuchchange.Likewiseinthecaseofdeathofadealerordissolutionor change in constitution of firm; the legal heir or executor, administrator or the partner as the case may be shall inform the registration officer if such death, dissolutionorchangeasthecasemaybe. REGISTRATIONCERTIFICATESTOCONTINUEINCERTAINCIRCUMSTANCES Actprovidesthatregistrationauthorizationetc.shallcontinueinthecircumstances mentioned below and fresh registration is not required to be obtained i. e. it providesforexceptionfortheactionofcancellationofregistrationcertificatesheld by the dealer in certain circumstances. On receipt of information as provided in Section 18, the registration, authorization etc. shall be amended accordingly. Such circumstancesareasunder: 1Changeinthenameornatureofbusiness; 2Changeintheconstitutionoffirmwithoutdissolutionthereof; 3Changeintrusteesofanytrustor 4ChangeintheguardianofanyWard. 5Shiftingofplaceofbusinesswithinthesamepincodenumber. 6InthecaseofconversionofPvt.Ltd.intothepublicLtd.Co.Visvisnoseparate registrationisrequiredasthereisnochangeinconstitutionoftheCompany.
GVAT
Residuarystatutoryformsavailableupto31072010
Notes: 1 Statutory forms like C, F, etc., for transaction on or after 01072008, are supplied online by Commercial Tax Department Gujarat, if the dealer furnishes relevantdetailsbyEFilingwithintimefixedforthesame. 2VidethisPublicCircular,Onemoreopportunityisgiventothedealers,inwhose case,suchformsarelefttobeobtainedonearlieroccasion. 3SuchdealerswillhavetomakeentriesforResiduarystatutoryformsinTemplate through Addon utility and contact jurisdictional Joint Commissionerwith its soft copy&otherrelevantdetails. 4Thisbenefitisavailableupto31/07/2010.
DecisionofHonbleGujaratVATTribunalunderrule12(1)
When the CST Act was introduced the 2nd proviso to rule 12(1) and thereafter periodical amendments were made which are as under:ical amendments were madewhichareasunder: 1 01101958 to 3131973 = Provided that the declaration in Form C as in forceimmediatelybeforethe1stOctober,1958mayalsobeuseduptothe30th September,1959withsuitablemodifications. 2 01041973todate=ProvidedthatFormCinforcebeforecommencementof theCentralSalesTax(Registrationand,Turnover)(Amendment)Rules,1973 mayalsobeusedupto31stDecember,1980withsuitablemodifications. 3 01121968 to 3131973 = Provided further that no single declaration or certificateshallcovermorethanonetransactionofsale,exceptincaseswhere the total amount of sales made in a year, covered by one declaration or certificate, is equal to or less than Rs. 5,000 or such other amount as the CentralGovernmentmaybyageneralordernotifyintheOfficialGazette. 4 01041973 to 2241973 = Provided further that no single declaration or certificateshallcovermorethanonetransactionofsale,exceptincaseswhere thetotalamountofsalesmadeinaFinancialYearcoveredbyonedeclaration or certificate is equal to or less than Rs. 5,000 or such other amount as the CentralGovernmentmay,byageneralorder,notifyintheofficialgazette. 5 23479to31384=Providedfurtherthatnosingledeclarationorcertificate shall cover more than one transaction of sale except in cases where the total amount of sales made in a Financial Year covered by one declaration or certificate is equal to or less than Rs. 10,000 or such other amount as the
CentralGovernmentmay,byageneralorder,notifyintheofficialgazette. 6 01041984 to 15101993: Provided further that no single declaration or certificateshallcovermorethanonetransactionofsaleexceptincaseswhere thetotalamountofsalesmadeinaFinancialYearcoveredbyonedeclaration orcertificateisequaltoorlessthanRs.25,000/orsuchotheramountasthe CentralGovernmentmay,byageneralorder,notifyintheofficialgazette. 7 16101993todate=Providedfurtherthatnosingledeclarationorcertificate shall cover more than one transaction of sale except in cases where the total amount of sales made in a Financial Year covered by one declaration or certificateisequaltoorlessthanRupeesonelakhorsuchotheramountasthe CentralGovernmentmay,byageneralorder,notifyintheofficialgazette. 8 070898 = Provided further that a single declaration may cover all transactions of sale which take place in one financial year between the same twodealers. 9 01102005 = Provided further that a single declaration may cover all transactionsofsale,whichtakeplaceinaquarterofafinancialyearbetween thesametwodealers. Now coming to first legal decision of Honble Madras HC in the case of Bimetal BearingsLtd.vs.StateofTamilNadureportedin90STCPage128whereinthegist offactsanddecisionisasunder: Intheassessmentfortheyear197879,someoftheCformsfiledbythepetitioner in support of its claim to be taxed at a concessional rate in respect of interstate sales covered by those forms were rejected by the assessing authority on the groundthatmorethanonetransactionexceedingthemonetarylimitofRs.5,000/ had been clubbed in each Cform, in contravention of the second proviso to rule 12(1) of the Central Sales tax(Registration and Turnover)Rules, 1957. This was confirmedbytheTribunal. Held, allowing the petition, that the ultimate requirement was the actual productionoftheCformsassuchtoestablishthegenuinenessofthetransaction and the fact that it satisfied the category of sales entitled to concessional rate of tax,asprescribedinlaw.Therequirementrelatingtothemonetarylimitinrespect of more than one transaction for an individual Cform would at the most be a directory requirement. The defect alleged in the present case was not so fundamentalinrespectofanyessentialfeaturegoingtotherootofthemattersas toaffecttheverylegalityandvalidityoftheCform.Whentherewasnoallegation ofabsenceofparticulars,torejecttheCformsintheirentiretyandtodeprivethe petitionerofthebenefitoftheconcessionalrateoftaxonthesolegroundthatthe formscomprisedmorethanonetransactioninexcessofthemonetarylimit,would beunreasonable.
IntheabovecasetheHonbleHChasheldthat,suchprovisoisdirectoryandnot mandatory and therefore more than one transaction in individual Cform is allowable. Thereafter,intheStateofGujaratinthecaseofM/s.HindustanCibaGeigyLtd.vs. State of Gujarat SA No. 85 & 86 /2001 judgment dtd. 17.02.2002 following the principlesofMadrasHCinthecaseofBimetalBearingsLtd.grantedclaiminoneC formcoveringtransactionmentionedinprovisotoRule12(1). This decision is reported in GSTBA PartI 2002 published by The Gujarat Sales TaxAssociation,Ahmedabad. Thereafter, amending the proviso to Rule 12(1) from 01.10.2005 the Honble GujaratVATTribunalinthecaseofSainestTubesPvt.Ltd.vs.StateofGujaratSA NO. 431/2001 Judgment dtd. 25.03.10, the order of the Honble Tribunal is as under: The appeal is allowed. The order of the learned Deputy Joint Commissioner of Commercial Tax, Division 1 dated 08.06.09 as well as the order dated 28.01.09 passed by the learned Deputy Commercial Sales Tax Commissioner, Division7, Gandhinagarisliabletobequashedandsetaside.WeholdthatRule12ofCentral Sales Tax (Register & Turnover) Rule 1957 as amended from 01.10.05 which requireCFormtobeproducedinquarteroffinancialyearasdirectory.Theyare machineryorproceduralprovisionsothesameshouldbeliberallyconstrued.We hold that Cform which covers transactions of more than one quarter as provisionsrelatedtoCformsaredirectoryandnotmandatory. Wealsodirecttheappellateauthoritytoprovideanopportunitytotheappellant to produce CForm. We also direct the authority that if appellant produce C Form covering transactions of more than one quarter, the same will be considered to be legal and valid and in accordance with law. However, it will be opentotheSalesTaxAuthoritytoscrutinizeandverifytheCFormproducedby theassesseeandtheauthoritycanexaminethesameastowhetheritislegal,valid asperprovisionsoflaw.Onanyothergroundexceptwhichwehavestatedabove. From the above, all the three decisions (1) of Honble HC and (2) of Honble GujaratSales/VATTribunalwhereithasbeenheldthat,provisotoRule12(1)is only directory and not mandatory and therefore even after amendment in Rule 12(1)w.e.f.01.10.2005,oneCformcancovertransactionsmorethanonequarter andthereforeclaimofsuchsingledeclarationcoveringtransactionsmorethanone quarterbetweenthetwodealersareallowable.

LastopportunityforStatutoryforms
Vide Public Circular No. GUJKA/VAT/6/20102011/OTW 94/83 Dt.02/06/2010, lastopportunityisgiventothedealerstoapplytotheCommercialTaxDepartment, by 31st July, 2010, for obtaining residuary statutory forms, if any, viz. 'C', 'F' etc., fromtheDepartment. ITCreversal@2%forInterStateSales Vide Notification No. (GHN14) VAT2010S. 11(6)(2)TH dt.29th June, 2010 u/s. 11(6)oftheGVATAct,InputTaxCredit(ITC)willhavetobereversedw.e.f.1stJuly, 2010@2%oftaxableturnoverofpurchaseswithinthestate,ofgoods,otherthan ScheduleII(13)goods(bullionetc.),forwhichtaxcreditisadmissible,iftheGoods areeithersold/resoldinthecourseofinterstatetradeandcommerceorareused asinputinthemanufactureofgoods,whicharesoldinthecourseofinterstatetrade andcommerce. NewPre/PostAuditLimits: The Department has issued new instructions for Pre/ Post Audits of Assessments and Appeals under GVAT Act for F.Y.20062007 & onwards, setting forth New HigherMonetaryLimits. AnnualReturnTimeLimitExtension: The time limit for filing annual return for F.Y. 200910 by dealers, not liable for AuditunderGVAT,hasbeenextendedfrom30thJune,2010to31stJuly,2010,vide PublicCircularNo.GUJKA/VAT15/201011/OTW.96/84Dt.13072010. TimelimitforRepaymentofDeferment: IntheGovt.ResolutionDt.080997,givingtheoptionofDefermentoftax,inlieuof exemptionunderentry69u/s49(2)oftheG.S.T.Act.1969,timelimitforrepayment ofdeferredamountwaslefttobeprovidedfor.RecentlyvideG.R.No.G.S.T.1209 56174, it is provided that the amount deferred shall be repaid in six annual installments.Thefirstsuchinstallmentshallbepaidwithin60daysfromtheendof the financial year in which either the period of the exemption expires or the monetarylimitofexemptionisover,whicheverisearlier.
IncidenceofTaxUnderGujaratValueAddedTaxAct,2003

Tax seems to eat the countrymen, but it cannot be gainsaid that it nourishes the country. Anonymous Paymentoftaxisahandsomeofferingtoonesmotherland. Anonymous The Gujarat Value Added Tax Act, 2003 is insinuated in the state of Gujarat, with effectfrom1stApril,2006.Although,enactedin2003,itrequiredfullthreeyearsto seethelightoftheday. ItisenactedundertheauthoritygiventotheStates,undertheConstitutionofIndia, underEntry54oftheStateList,wherebytheStatesareauthorizedtolevyTaxeson salesorpurchaseofgoodsotherthannewspapers. Salesorpurchasesofgoodsarethose,whichtakeplaceinGujarat.Thus,VAT,levied byGujaratState,cannotanddoesnotlevytax(i)onaninterStatesale,or(ii)onan interState consignment, or (iii) on an outside State sale, or (iv) on a sale in the courseofimportor(v)onasaleinthecourseofexport. TheActdoesnotrendereverysaleorpurchasetaxable.Itstentaclestouchonlyto thesalesorpurchases,asareidentifiedintheAct. It is the purpose of this treatise to delineate the various facets and circumstances whichrenderadealerliabletotax. WhenIsSomeoneLiable? Theedificeofeverytaxingstatuteisbuiltuponthreepillars,namely, 1Declarationofliability 2Quantificationofliability 3Collectionoftaxasperquantifiedliability It is the avowed purpose of this essay to elaborately and comprehensively explain theintricaciesofthefirstnamedpillaroftheGujaratValueAddedTaxAct,2003. Foraproperappraisaloftheprovisionthrustingliabilitytopaytaxonadealeritis essentialtorefertoSec.3oftheGujaratValueAddedTaxAct,2003,whichdeclares
incidences of tax, and is the charging section of the Act. The said Section is reproducedbelowvibration. IncidenceofTax(Sec.3) 1SubjectoftheprovisionsofthisAct,everydealer, i. whose total turnover during the year immediately preceding the appointed day exceeded rupees five lakhs and whose taxable turnover exceeded rupees ten thousand in a year (the aforesaid amounts of total turnoverandtaxableturnoverarehereinafterreferredtoasthresholdsof turnover),or ii. whowasregisteredundertheearlierlaworundertheCentralSalesTax Actasontheappointedday,or iii. whose total turnover and taxable turnover in any year first exceed the thresholdsofturnover,or iv. Who is registered or liable to be registered as a dealer under this Act or undertheCentralSalesTaxActatanytimeaftertheappointeddayshall beliabletopaytaxinaccordancewiththeprovisionsofthisAct. 2 Notwithstanding anything contained in this section, a casual dealer or an auctioneershallbeliabletoberegisteredifhistaxableturnoverofsalesexceedsten thousandrupeesandheshallbeliabletopaytaxinaccordancewiththeprovisions ofthisAct. 3Thedealershallbeliabletopaytax. a. in case of clauses (i) and (ii) of subsection (1), with effect from the appointed day. b. Incaseofclause(iii)ofsubsection(1),withimmediateeffectwhenhisturnover calculated from the commencement of the year first exceeds the thresholds of turnover. c. Incaseofclause(iv)ofsubsection(1),withimmediateeffectwhenhebecomes soliableorthedateofregistrationunderthisAct,whicheverisearlier. Provided :Thatthedealershallnotbeliabletopaytaxinrespectofthresholdsof turnoverastakesplaceduringtheperiodpriortotherelevantdateofeffectunder thissubsection. 4EverydealerwhohasbecomeliabletopaytaxunderthisActshallcontinuetobe so liable until the expiry to one year during which his total turnover and taxable turnoverbelowthethresholdsofturnover.[xxx]
ProvidedthatanydealerwhoseliabilitytopaytaxunderthisActceasesorhistotal turnover and taxable turnover during the year remains below the thresholds of turnover, may apply for the cancellation of his certificate of registration; and on suchtopaytaxtillhiscertificateofregistrationiscancelled. 5Notrelevant 6Notrelevant DEFINITIONSCONNOTATIONOFIMPORTANTTERMS/WORDSINSEC.3 Athreadbareanalysisofthesectionasquotedabovenecessitatesclearconceptsof some important words/terms germane to the topic under discussion which are givenbelow. (1) Appointed day: appointed day means the date on which the remaining provisionsofthisActshallcomeintoforceundersubsection(3)ofsection1. (2)Business:businessincludes (i) anytrade,commerceormanufactureoranyadventureorconcerninthe nature of trade, commerce or manufacture, whether or not such trade, commerce,manufacture,adventureorconcerniscarriedonwithamotive tomakeprofitorgainandwhetherornotanyprofitorgainaccruesfrom suchtrade,commerce,manufacture,adventureorconcern;and (ii) any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste products or such other goods, or waste or scrap of any of them which is ancillary or incidental to or resulting from such trade, commerce,manufacture,adventureorconcern. (3) Goods : goodsmeansallkindsofmovableproperty(otherthatnewspapers, actionable claims, electricity, stocks and shares and securities) and includes live stocks,allmaterials,articlesandcommoditiesandeverykindofproperty(whether as goods or in some other form) involved in the execution of works contract, all intangible commodities and growing crops, grass, standing timber or things attachedtoorformingpartoftheland,whichareagreedtobeseveredbeforesales orunderthecontractofsale.
Note : ThesubjectmatteroftheActisgoodswhichincludesallkindsofmovable properties, whether tangible or intangible. However, immovables, like land or buildingormachineryandplantattachedtoland,donotformpartofgoods. (4) Dealer : dealer means any person who, for the purpose of or consequential with or incidental to or in the course of his business buys, sells, manufactures, makes supplies or distributes goods, directly or otherwise, whether for cash or deferredpayment,orforcommission,remunerationorotherwiseandincludes. SubsequentportioninthisdefinitionexcepttheExceptionsisnotreproducedhere, asitisnotappositeforourdiscussion. EXCEPTIONS: (i) an agriculturist who sells exclusively agriculture produce grown on land cultivatedbyhimpersonally; (ii) an individual who sells exclusively any fish or any seafood caught by him personally or by any member of his family on account of or on behalf of such individualand (iii) a charitable, religious or educational institution, carrying on the activity of manufacturing, buying, selling or supplying goods, in performance of its functions, forachievingitsavowedobjects,whicharenotinthenatureofbusiness. Note: It is of paramount importance to note, that the activity, by such an institution, though in the nature of business, must be for achieving its avowed objects.Thenonlythebenefitofexceptioncanbeavailedof. (5) Person : Person includes an individual, a joint family or Hindu Undivided Family,acompany,afirm,anassociationofpersonsorbodyofindividuals,whether incorporatedornot,asociety,cluborotherinstitution,alocalauthority,theCentral Government or a State Government and every artificial juridical person not falling withinanyoftheprecedingdescription. (6) Turnover of Purchases: turnover of purchases means the aggregate of the amountsofpurchasespricepaidorpayablebyadealerinrespectofanypurchaseof goods made by himduring a given period after deducting the amountof purchase price,ifany,refundedtothedealerbythesellerinrespectofanygoodspurchased fromthesellerandreturnedtohimwithintheprescribedperiod;
(7) Turnover of Sales: turnoverofsalesmeanstheaggregateoftheamountof sale price received or receivable by a dealer in respect of any sale of goods made duringagivenperiodafterdeductingtheamountofsaleprice,ifany,refundedby the dealer to a purchaser, in respect of any goods purchases and returned by the purchaserwithintheprescribedperiod; (8) Total Turnover: total turnover means aggregate of the following transactionseffectedbyadealer (a)turnoverofsalesprpurchasesofgoodswithintheStatewhethersuchsalesor purchasesofgoodsaretaxableorexemptunderthisAct; (b)turnoverofsalesofgoodsinthecourseofinterStatetradeorcommerce; (c)turnoverofsalesofgoodsinthecourseofexportofgoodsoutoftheterritoryof India. (d) turnover of sales by a dealer on his own account and also on behalf of his principal. (9) Sale : salemeansasaleofgoodsmadewithintheStateforcashordeferred paymentorothervaluableconsideration[Therestofthedefinitionisnotnecessary forourdiscussion]. (10)Year:yearmeansfinancialyear THRESHOLDLIMITS Thethresholdsdiscerniblefromclause (i) ofsubsection3(1)areasfollows. (ii) Itwillbetransparentlyconspicuousthatthetotalturnoverduringtheyear mustexceedRs.5lakhs. (iii) It is not enough that the turnover should have merely exceeded Rs. 5 lakhs,butthateventhetaxableturnovershouldalsoexceedRs.10,000/ inayear. Thus, if the turnover may be Rs. 50 lakhs but taxable turnover may be say, Rs. 9,000/thedealerisnotliable
Theturnoverofsalesaswellaspurchases,bothhavetobeseparatelyconsidered.It maybethatsalesmaybelessthanRs.5lacs,butpurchasesmaybemorethatRs.5 lacs.Insuchacaseliabilityisattracted. InstancesWhereLiabilityDoesNotDependUponTHRESHOLDS (a)UnderSec.3: Although, the threshold limits are prescribed in Sec. 3 for imputing liability to a dealer, there are provisions in the said Sec. 3, itself wherein the liability is thrust eveninabsenceofanyturnover.Suchinstancesarestatedbelow. (1)WhereadealerwhowasregisteredundertheearlierLaw,namely,GujaratSales TaxAct,1969. (2)WhereadealerisregisteredundertheCentralSalesTaxAct,1956. (3)Whereadealerisacasualdealerandwhosetaxableturnoverofsalesexceeds Rs.10,000/.Acasualdealerisapersonwhowhetherasprincipal,agentorinany other capacity, undertakes occasional transaction of a business nature in any exhibitioncumsaleorauctionorotherwiseintheState,whetherforcash,deferred payment,commission,remunerationorothervaluableconsideration. (4) Wherethedealerisanauctioneer,andhistaxableturnoverofsalesexceedsRs. 10,000/. (b)UnderOtherSections. (5)Whenadealerisvoluntarilyregistered(Sec.22(4))(seebelow) (6)Wherethetransfereeofabusiness(whetherentirelyorpartly)carriesonsuch transferredbusiness[Se.51(20)]. VoluntarilyInvitingofLiability[S.22] The Act also envisages the concept of voluntary registration, Consequently, the liabilitytopaytaxemergerightfromthedayfromwhichthedealerisregistered.In thiscase,theliabilitydoesnotdependuponthecrossingofthresholdlimit. ContinuationofLiability
Once the liability to pay tax has accrued, it continues until the expiry of one year duringwhichthetotalturnoverandtaxableturnoverarebelowthethresholdlimit. However,incasesuchadealerisregisteredundertheAct,evenifhisturnovermay fall below, the threshold limits, his liability would continue unabated, until his registrationcertificateiscancelled.Ofcourse,ifagainhisturnovermayexceedthe thresholds,inanysubsequentyear,hewouldbeagainliabletopaytax. SOMEPERTINENTLEGALNICETIES Every fiscal enactment has in its fold intncacies which endear our wits. Let us narratesomeoftheminrelationtotheincidenceoftax. (a)Lookatthedefinitionofturnoverofsales.Forcalculating,turnover,thevalue of goods sold, but returned within prescribed period should not be included. [Sec. 2(33)] (b)Ifgoodsmaybesuppliedandbilled,buttheyarerejectedbytheintendingbuyer, onaccountoftheybeingsubstandardornotmatchingwithorderedspecifications, thevalueofsuchrejectionscannotbeincludedintotalturnover.[MetalAlloyCo. (P)v.CommercialTaxOfficerLtd.(39STC404)].(CAL) (c) Receipts for labour charges not involving any supply of material cannot be includedintotalturnover. (d) Value of sales / purchases effected out of Gujarat are not includible in total turnover. (e) Value of transfers to branches/agents outside the State of Gujarat are also not includibleintotalturnover. (f) In case of receipts for workscontracts involving use of materials and labour/sevices,theamountrepresentinglabourchargesforexecutionoftheworks contractsisnotincludibleintotalturnover.(Sec.2(24)). (g)NeedlesstosaythatturnoveruptothelimitofRupees5lakhsisnotliabletotax. [Sec.3(3)(c)] (h) Under Central Sales Tax Act, liability accrues from the very first rupee of sale, butundertheGujaratValueAddedTaxAct,2003,theliabilitycommencesonlyafter thethresholdlimitsarecrossedorfromthattimeasmaybeprescribedintheAct. [SeeInstances,whereliabilitydoesnotdependuponthresholds].
DocumentsrequireforregistrationundertheGujaratVATAct, 2003.
1 ApplicationtobefiledinFormNo.101alongwithFormNo.101A,101B,10C, 101D&101E. Notes: (a) if the dealer has started new business and the turnover exceeds Rs. 5 Lakhs alongwithtaxableturnoverofRs.10,000/theapplicationistobemadewithin30 daysfromthedateofexceedingtheturnover. (b)IncaseoftransferofbusinessinwholeorpartthetransfereenotholdingVAT registrationnumberunderGujaratActhastoapplywithin30daysfromthedateof transfer. (c)Incaseanydealerwantstoapplyforregistrationwhoseturnoverisbelowthe specified limit as shown in small (a) such dealer can apply for voluntarily registrationU/s.22bydepositingasumofRs.25,000/intoGovernmenttreasury whichdepositisadjustabletowardsfuturetaxliability. Thefollowingdetailsarerequiredtobefilledintheapplicationandproofarealso requiredtobeattachedalongwiththeapplication.Pleaseseethatallthedetailsin FormNo.101atSerialNo.1to16arefullyfilledinandvariousdetailsareattached. Form No.101D requires to be filed separately for all the Partners/ Directors Managers. 2 ProofofownershipofBusinessplace. a Sales Deed/Allotment Letter/ Share Certificate given by Industrial EstateorNonTradingCorporationorBuilder. b CopyofElectricityBill c Ifthebusinessplaceisrented: i. iii.
Consentletterfromowneroftheplace. Proofofownershipofthelandlordofplaceofbusiness[asper above(a)]
ii. XeroxCopyofLeaseDeed.
3 Bank Account Details (Seal & Signature of Banker, Name & Address of the
Bank, Account Number, Type of Account) See column 9 of Form No. 101. 4 FulladdressofheadofficesituatedoutsidetheStateofGujaratwithlist of all the branches situated outside the State of Gujarat and within the State of Gujarat with xerox copies of State VAT registration certificates andcentralsalestaxregistrationcertificates. 5 Details of turnover : Tax Free goods or Taxable goods purchased entirely from a registered dealer worth Rs. 5 lakhs and taxable purchase or sales worth Rs. 10,000/ for compulsory registration certificate. 6 Proof of registration under the Shop Establishment Act/Factory Act as the casemaybe.(notapplicabletotheNLDDealers) 7 Proofdetailstobefurnished. A Incaseofthecompany, a MemorandumofassociationandArticlesofassociation.(TrueCopy). b ResolutionpassedbytheBoardofDirectorsforregistrationunder the Gujarat Sales Tax Act and for establishing the branch in the StateofGujarat. c d Authority letter given to the authorized person toact on behalf of company. XeroxcopyofPANCardoftheCompanyallottedbytheIncomeTax Department.
e PANCardofDirectors. f AddressProofofDirectors. g NotarisedphotocopyofPassportofManagingDirector.
B.InthecaseofindividualapplyingregistrationforhisProprietaryConcern. 1 AdealerapplyingforregistrationundertheActshallfurnishalongwiththe applicationforregistrationasecurityinthemannerreferredtoinclauses(ii) and(iii)ofsubrule(2),notexceedingrupeesfiftythousand: Provided that the amount of the security shall not exceed rupees ten thousandincasethepersonprovidesanythreeofthefollowingdocuments, namely: a last paid electricity bill in his name or his parents name or his spousesname,
b last paid telephone bill in his name or his parents name or his spousesname, c the Permanent Account Number (PAN) issued under the Incometax Act,1961, d anydocumentasproofofownershipofprincipalplaceofbusinessin hisnameorhisparentsnameorhisspousesname, e any document as proof of ownership of residential property or any immovable property in his name or parents name or his spouses name, f notarized photocopy of the passport of proprietor or managing partnerormanagingdirector, g certificate obtained from a local authority in respect of shop and establishment,or; h registration certificate obtained from Custom and Central Excise Authority: ForCSTRegistrationsecurityistobefurnishedonthebasisofnatureof businessandthesameisdecidedatthetimeofhearing.
8 Nature of Business with list of goods to be purchased or sold, Description of such goods should be given in detailed , so that in future the question of unauthorized purchases against Cdeclaration maynotcomeinthewayattractingpenalty.Youhavetofurnishtheabove detailsinfollowingformat. Sr.No.
Description of goods for the Schedule Entry and Rate of VAT purposeofsalesandpurchases applicable.
9 The application for registration shall be accompanied by three copies of recent passport size photograph, as follows, duly attested by a VAT Practitioner whose name has been registered in the list maintained by the CommissionerorbyaGazettedOfficeroranadvocate: i. ii. inrespectofanindividual,thephotographoftheproprietor, in respect of a Hindu Undivided Family, the photograph of the karta.
iii. in respect of a partnership firm, the photograph of all the partners. iv. in respect of private limited company or a limited company, photographsofallmembersofboardofdirectors.
10 Threecopiesofletterofauthoritydulysealedandsigned(attachherewith)
GOAVAT
IncidenceoftaxunderGoaValueAddedTaxAct.2005
Whatisanincidence? The meaning of incidence is something that happens or takes place. In any taxing statute, the incidence means something or some situation which makes a person liable to pay tax under the said statute. Under Goa Value Added Tax Act 2005, section3isachargingsectionwhichstipulatesthevariousincidenceswhichmakea personliabletopaytaxunderthesaidAct.SimilartoGoaVATAct,thereareother similar taxation statutes like the Goa Tax on Luxuries Act and Goa Entertainment TaxActwhichalsoprovideforsituations,whichcreateanobligationonthepartof any person to pay tax and also get registered under the said statute to regularly operateandperformwithintheprocedurelaiddowntherein.VATisataxonsaleof goods. Under Goa VAT Act 2005, as is mentioned in the forgoing para, section 3 provides for incidence of tax. When any statue is enforced or implemented, generallyalwaysoratleastinmostofthecases,itregulatestheexistingsituationin the field and then provides to cover the future cases. To elaborate the issue one needstoappreciatethatthebusinessexistedbeforethetaxonsaleofgoodscould be introduced and therefore the first obligation of the law would be to cover the incidenceoftaxofsuchbusinessesandthenprovidefortheliabilityandregistration ofthenewpersonscominginordesiringtostartnewbusiness. UnderGoaVATAct2005thefollowingarethesituationswhichcreatetheincidence oftaxorletssaydecidesordeterminestheliabilitytopaytax:
(i) All the dealers who were liable under the provisions of the previous Act and whose turnover has exceeded the taxable quantum specified in this law shall continuetobeliableunderthisAct. (iii)Incaseofadealerengagedintradingormanufacturing: (a) person who is an importer of goods from any place outside the state or a manufacturershallbeliabletopaytaxuponhisturnoverofsalesfirstexceeding Rs.1.00lac. (b)personwhoisacasualtraderoranonresidentdealershallbeliabletopay taxuponhisturnoverofsalesfirstexceedingRs.10000/ (c.)Incaseofapersondoingexclusivelylocalpurchaseandsalesthedealershall beliabletopaytaxuponhisturnoverofsalefirstexceedingRs.5.00lac. (iv)Whereapersonmakesinterstatesaleinhisbusiness,heaccruesliabilitytopay tax under CST Act 1956 which casts an obligation on the said person to call for registrationunderthegeneralSalesTaxoflawoftheStatei.e.VAT. (v) Where a dealer or a person makes any exports out of India or makes a stock transfer outside the State, it also creates an incidence of tax under the Act and makes him liable to pay tax and call for registration. The terms like Year, Person, Turnoverofsales,NonresidentortheCasualtraderoraManufacturearedefinedin theActandthereforesuchdefinitionsareimportantfactorsindecidingtheincident of tax. Any person whether a manufacturer or a trader once becomes liable, shall continuetobeliableunlesstheregistrationiscalledforcancellation.Thepersonso liable shall apply for registration as dealer and shall hold a valid certificate of registrationduringthecontinuationofbusiness,untilsuchliabilityceases.Incase of other Tax statutes like Luxury Tax, Entry tax, Entertainment tax, Service tax, Centralexciseduty,theincidenceoftaxisalmostsimilarbutforthemonitorylimits oftaxablequantumbeingindependentofeachother.
Registration
AInformationrequiredtofillFormVATI DealersName,localaddress(ofH.O.andbranches/warehouses/factories),address in other States with Sales Tax registration no./ TIN, nature of business (trading,
manufacturing,others),fourmaincommoditieswhichthedealerdealsinfortrading orasfinishedgoods,detailsofimmovablespropertyinGoa. BDetailsofyourBankAccount: i.e.bankname,typeofaccount,accountnumber CCopyofRentagreementforyourpremisesinGoaNOCofpremisesownerforuse ofpremiseswithoutrent. DPANcardXeroxoftheapplicantfirm/company EDetailsofDirectors/partners/proprietor: Name,fathersname,age,homeaddressanddetailsofotherbusinessinwhichthey are interested (name, address and particulars of such business), PAN card Xerox, form32incaseofDirectorsofaCompany. FAuthoritylettertotheconsultanttodotheVATetc.registration. GCopyofPartnershipDeed/Memorandum&ArticlesofAssociation. HPowerofAttorneytotheManager(ifany). I Photos of partners/ In case of a company, at least 2 directors including MD (if thereisMD) JSignofpartners/2directorsontheformVATI. K Rs. 2000/ Govt. fee for voluntary registration under VAT. [Provisional registrationu/s18(3)willbevalidtillSalescrossRs.1lac] LShareholdingpatternofDirectors/partners. MSignsofDirectors/partnersandalsosignofwitness(withname&address)on FormA.Rs.25courtfeestamponformAtobeaffixed. NNameoftheManagerofthebusiness. O Give the details of the goods or classes of goods which are purchased by the dealerinthecourseofinterstatetradefor: aResale. bUse in the manufacture or processing of goods for sale (Fixed assets; Raw
materials/consumables;Repair/maintenanceitems). c Useinthepackingofgoods
CST
AmendmentsinCST
Finance Act No. 14 of 2010 has made important amendment in Central Sales Tax Act 1956 out of changes made, section 18A will be effective from 01.06.2010 for whichpublicnoticeisissuedNo.GSR455(E)dtd.28.05.2010.134STCPage473(SC) ,hasheldthat,thetransactioninquestionisnotaninterstatesale,thenitamounts to a transfer of stock. This finding is made by the statutory authority who has the jurisdictiontodosoandthereisnoprovisionforappeals.Thereforetheordermade bysuchauthorityisconclusive,inthatitcannotbereopenedonthebasisthatthere hasbeenamereerrorofjudgment. Itcanonlybereopenedonasmallsetofgroundssuchasfraud,misrepresentation, collusion,etc. DuetothisjudgmentofSupremeCourtinabovecase,oncedealersclaimofbranch transfer or consignmenttransfer against formF is accepted by the department in assessment,itbecomesfinalorderforthedepartment. Tonullifytheeffectofabovedecisionnewsubclause(3)hasbeenaddedinSection 6A which says that, assessing authority has power to reopen, on the ground of discovery of new facts or revision by a higher authority on the ground that the findingsoftheassessingauthorityarecontrarytolaw. AmendmentofSection6A: In the Central Sales Tax Act, 1956 (74 of 1956) (hereinafter referred to as the CentralSalesTaxAct,insection6A, 6a. (1) Where any dealer claim that he is not liable to pay tax under this Act, in respectofanygoods,onthegroundthatthemovementofsuchgoodsfromoneState
toanotherwasoccasionedbyreasonoftransferofsuchgoodsbyhimtoanyother place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessingauthority,withintheprescribedtimeorwithinsuchfurthertimeasthat authority may, for sufficient cause, permit, a declaration, duly filled and signed by theprincipalofficeroftheotherplaceofbusiness,orhisagentorprincipal,asthe casemaybe,containingtheprescribedparticularsintheprescribedformobtained from the prescribed authority, along with the evidence of despatch of such goods [andifthedealerfailstofurnishsuchdeclaration,then,themovementofsuchgoods shallbedeemedforallpurposesofthisActtohavebeenoccasionedasaresultof sale.] (2)Iftheassessingauthorityissatisfiedaftermakingsuchinquiryashemaydeem necessary that the particulars contained in the declaration furnished by a dealer under sub section (1) [are true and that no interState sales has been effected, he may,atthetimeof,oratanytimebefore,theassessmentofthetaxpayablebythe dealerunderthisAct,makeanordertothateffectandthereuponthemovementof goodstowhichthedeclarationrelatesshall,subjecttotheprovisionofsubsection (3)]bedeemedforthepurposeofthisActtohavebeenoccasionedotherwisethan asaresultofsale. [(3) Nothing contained in subs section (2) shall prelude reassessment by the assessingauthorityonthegroundofdiscoveryofnewfactsorrevisionbyahigher authorityonthegroundthatthefindingsoftheassessingauthorityarecontraryto law, and such reassessment or revision may be done in accordance with the provisionsofgeneralsalestaxlawoftheState] AppealstothehighestappellateauthorityoftheState. Ifinanycase,ifanorderispassedinassessmentorreassessmentdisallowingthe claimofbranchtransferorconsignmenttransfer,thenasperoldprovisioninVAT law, appeal was allowed to file before 1st appellate authority namely, Deputy Commercial Tax Commissioner(Appeals) or Joint Commercial Tax Commissioner (Appeals) Toamendthepresentposition,newsection18AhasbeeninsertedinCentralSales Tax Act and as per the provisions of new section 18A, if an order is passed disallowingtheclaimofbranchtransferinassessmentorreassessmentorderandif dealer is not satisfy with the order then, rather filing 1st appeal before Deputy Commercial Tax Commissioner(Appeals), or Joint Commercial Tax
Commissioner(Appeals),hecandirectlyfileanappealbeforethehighestappellate authorityoftheState(IncaseGujarat,itisGujaratVATTribunal). Sub section (2) ofSection 18Asays that,appeal shall be filedwithin 60days from thedateofreceiptoforder. CasespendingbeforetheFirstAppellateAuthority All cases pending before the 1st Appellate Authority as on 01.06.2010 will be transfertoVATTribunalasperprovisionsofsubsection(2)ofsection18A. Tribunal will give an opportunity of hearing to both the parties and will pass appropriateorder. Tribunalwilldecidethecasewithin6monthsfromthedateoffilingoftheappeal. Newsection18Aisasunder: AppealstohighestappellateauthorityofStateSection18A: (1)NotwithstandinganythingcontainedinaStateAct,anypersonaggrievedbyan order made by the assessing authority under sub section (2) of section 6A, or an order made under the provisions of sub section (3) of that section, may notwithstanding anything contained in a State Act, any person aggrieved by an order made by the assessing authority under sub section (2) of section 6A, or an order made under the provisions of sub section (3) of that section, may, notwithstandinganythingcontainedinthegeneralsalestaxlawoftheappropriate State, prefer an appeal to the highest appellate authority of the State against such order:Providedthatanyincidentalissuedincludingtherateoftax,computationof assessableturnoverandpenaltymayberaisedinsuchappeal. (2)Anappealundersubsection(1)shallbefiledwithinsixtydaysfromthedateon which the order referred to in that sub section is communicated to the aggrieved person: ProvidedthatanyappealforwardedbythehighestappellateauthorityofaStateto the first appellate authority under proviso to sub section (2) of section 25 and pending before such authority immediately before the appointed day shall be transferred, on such appointed day, to the higher appellate authority of the State andthesameshallbetreatedasanappealfiledundersubsection(1)anddealtwith accordingly.
Explanation:Forthepurposesthissubsectionappointeddaymeanssuchdateas theCentralGovernmentmay,bynotificationintheOfficialGazette,appoint. (3)ThehighestappellateauthorityofaStatemay,aftergivingboththepartiesan opportunityofbeingheard,passappropriateorder. (4)ThehighestappellateauthorityoftheStatemay,asfaraspracticable,hearand decide such appeal within a period of six months from the date of filing of the appeal. (5) Notwithstanding anything contained in a State Act, the highest appellate authority of a State may, on the application of the appellant and after considering relevantfacts,includingthedepositofanyamounttowardslocalorcentralsalestax inotherStatesonthesamegoods,passanorderofstaysubjecttosuchtermsand conditionsasitthinksfit,andsuchordermay,interalia,indicatetheportionoftax asassessed,tobedepositedpriortoadmissionoftheappeal. Explanation:Forthepurposeofthissectionandsections20,21,22and25,highest appellateauthorityofastate,withitsgrammaticalvariationsmeansanyauthority or tribunal or court, except the High Court, established or constituted under the generalsalestaxlawofaState,bywhatevernamecalled. Section 18A of the Central Sales Tax Act, 1956 Appeals to highest appellate authorityofstateAppointeddaynotifiedforpurposesofsection18A(2) NotificationNo.G.S.R.455(E),dated2852010 InexerciseofthepowersconferredbyExplanationtosubsection(2)ofSection18A of the Central Sales Tax Act, 1956 (74 of 1956), the Central Government hereby appointsthe1stJune,2010astheappointeddayforthepurposesofthesaidsub section(2)ofSection18ofthesaidAct.
SERVICETAX
SynopsisofNotifications,Circulars&Letters
Central Government vide Notification No.24/2010ST dated 22nd June, 2010 has notified 1st July,2010 as the day on which the provisions of clauses (A) & (B) of Section76oftheFinanceAct,2010shallcomeintoforce.Hencethefollowingnewly introduced services & existing services whose scope is extended would come into forcefrom1stJuly,2010. EXISTINGSERVICES NameofService TaxableservicedefinedinSection BusinessAuxiliaryServices 65(105)(zzb) CommercialorIndustrialConstruction 65(105)(zzq) ConstructionofComplex 65(105)(zzzh) PortService 65(105)(zn) OtherPortService 65(105)(zzl) AirportService 65(105)(zzm) CommercialTrainingorCoaching 65(105)(zzc) Services SponsorshipServices 65(105)(zzzn) AircraftOperatorsServices 65(105)(zzzo) AuctioneersServices 65(105)(zzzr) Renting of Immovable Property 65(105)(zzzz) Services InformationTechnologySoftware 65(105)(zzzze) Services ManagementofULIPServices 65(105)(zzzzf) NEWLYINTRODUCEDSERVICES Promotion,MarketingorOrganizing 65(105)(zzzzn) GameofChance,includinglottery HealthServices 65(105)(zzzzo) Maintenance of Medical Reports of 65(105)(zzzzp) Employees PromotionofBrandofGoods,Services, 65(105)(zzzzq) Events, BusinessEntityetc. Permittingcommercialuseor 65(105)(zzzzr)
exploitationofanyevent ServicesprovidedbyElectricity 65(105)(zzzzs) Exchanges CopyrightServices 65(105)(zzzzt) SpecialservicesprovidedbyBuilderor 65(105)(zzzzu) anyotherpersonauthorizedbysuch buildertoprospectivebuyer ALLTHEFOLLOWINGNOTIFICATIONSAREEFFECTIVEFROM1STJULY,2010 Central Government vide Notification No.25/2010ST dated 22nd June, 2010 has exempted the taxable services of air transport of passengers (Section 65(105)(zzzo))fromwholeofservicetaxinrespectof: (i)apersonwhohasarrivedatacustomsairportfromaplaceoutsideIndiaandisin transitthroughIndia,providedthathedoesnotpassthroughimmigrationanddoes notleavecustomsareaandcontinueshisjourneytoaplaceoutsideIndia;and (ii)apersonemployedorengagedbytheaircraftoperatorinanycapacityonboard theaircraft; Central Government vide Notification No. 26/2010ST dated 22nd June, 2010 has exempted the taxable services of air transport of passengers (Section 65(105)(zzzo))fromsomuchofservicetaxasisinexcessof: (a)10%ofthegrossvalueoftheticketorRs.100perjourney,whicheverisless,for passengerstravellinginanyclass,withinIndia; (b)10%ofthegrossvalueoftheticketorRs.500perjourney,whicheverisless,for passengersembarkinginIndiaforaninternationaljourneyineconomyclass: Thesaidexemptionisnotapplicabletocaseswherethecreditofdutypaidoninputs usedforprovidingsuchtaxableservicehasbeentakenundertheprovisionsofthe CENVAT Credit Rules, 2004. The term economy class for the purpose of the said notification is defined as where there is more than one class of travel, the class attractingloweststandardfare&wherethereisonlyoneclassoftravel,thatclass. Central Government vide Notification No. 27/2010ST dated 22nd June, 2010 has exempted the taxable services of air transport of passengers (Section 65(105)(zzzo))fromwholeofservicetaxinrespectofpassengersembarkingona journey originating or terminating in an airport located in Arunachal Pradesh,
Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura or at Baghdogra (WestBengal). Central Government vide Notification No. 28/2010ST dated 22nd June, 2010 has exemptedthetaxableservicesofconstructionofcomplex(Section65(105)(zzzh)) provided to Jawaharlal Nehru National Urban Renewal Mission & Rajiv Awaas Yojanafromwholeofservicetax. Central Government vide Notification No. 29/2010ST dated 22nd June, 2010 has amendedNotificationNo.1/2006STdated1stMarch,2006wherebyabatementof 75%isgrantedfromthegrossamountinrespectoftaxableservicesofcommercial or industrial construction (Section 65(105)(zzq)) & construction of complex (Section65(105)(zzzh))subjecttofollowingconditions: thetaxableservicesprovidedarenotinthenatureofonlycompletion&finishing servicesreferredtoinSection65(25b)(c)&Section65(30a)(b). thegrossamountchargedshallincludethevalueofgoodsandmaterialsuppliedor providedorusedforprovidingthetaxableservicebytheserviceprovider. costoflandhasnotbeenseparatelyrecoveredfromthebuyerbybuilderorhis representative theserviceproviderhasnottakenthebenefitofNotificationNo.12/2003STdated 20thJune,2003 theserviceproviderhasnotavailedthecreditofexciseduty&servicetaxpaidon inputs, capital goods and input services under the CENVAT Credit Rules, 2004. Central Government vide Notification No. 30/2010ST dated 22nd June, 2010 has exemptedthetaxableservicesofsponsorship(Section65(105)(zzzn))fromwhole ofservicetaxprovidedfor: (i) tournaments or championships organized by any of the National Sports FederationsorFederationsaffiliatedtosuchNationalSportsFederations,wherethe participatingteamsorindividualsrepresentanyDistrict,StateorZone; (ii)tournamentsorchampionshipsorganizedbyAssociationofIndianUniversities InterUniversity Sports Board, School Games Federation of India, All India Sports CouncilfortheDeaf,ParalympicCommitteeofIndia(forthephysicallychallenged), SpecialOlympicsBharat(forthementallychallenged);
(iii)tournamentsorchampionshipsorganizedbytheCentralCivilServicesCultural andSportsBoard; (iv) tournaments or championships organized as part of National Games, by the IndianOlympicAssociation; (v) tournaments or championships organized under Panchayat Yuva Kreeda Aur KhelAbhiyaan(PYKKA)Scheme Central Government vide Notification No.31/2010ST dated 22nd June,2010 has exemptedfollowingservicesfromwholeofservicetaxwhenprovidedwithinaport oranairport: (i)repairofshipsorboatsorvesselsbelongingtotheGovernmentofIndiaincluding Navy or Coast Guard or Customs but does not include Government owned Public SectorUndertakings; (ii) repair of ships or boats or vessels where such process of repair amounts to manufacture and has the meaning assigned to it in clause (f) of Section 2 of the CentralExciseAct,1944; (iii)supplyofwater; (iv)supplyofelectricity; (v)treatmentofpersonsbyadispensary,hospital,nursinghomeormultispeciality clinic(exceptcosmeticorplasticsurgeryservice); (vi)servicesprovidedbyaschoolorcentretoprovideformaleducationotherthan thoseservicesprovidedbycommercialcoachingortrainingcentre; (vii)servicesprovidedbyfireserviceagencies. (viii)pollutioncontrolservices CentralGovernmentvideNotificationNo.33/2010ST,NotificationNo.34/2010ST & Notification No. 35/2010ST all dated 22nd June, 2010 has deferred the levy of servicetaxontaxableservicesprovidedbyGovernmentRailwaystoanypersonin relationtotransportofgoodsbyrail(Section65(105)(zzzp))to1stJanuary,2011. Central Government vide MF (DR) Order No. 1/2010 dated 22nd June, 2010 has notified following persons, besides any Government authority, as authority competent for issuing completion certificate as prescribed under the taxable services of commercial or industrial construction (Section 65(105)(zzq)) & constructionofcomplex(Section65(105)(zzzh)) (I) architect registered with the Council of Architecture constituted under the ArchitectsAct,1972;or (ii)charteredengineerregisteredwiththeInstitutionofEngineers(India);or (iii)licensedsurveyoroftherespectivelocalbodyofthecityortownorvillageor developmentorplanningauthority;
who is authorised under any law for time being in force to issue completion certificate. ALLTHEFOLLOWINGNOTIFICATIONSAREEFFECTIVEFROM22NDJUNE,2010 Central Government vide Notification No. 32/2010ST dated 22nd June, 2010 has exempted the taxable service provided to any person, by a distribution licencee, a distributionfranchisee,oranyotherpersonbywhatevernamecalled,authorizedto distributepowerundertheElectricityAct,2003,fordistributionofelectricity,from wholeofservicetax. CentralGovernmentvideNotificationNo.25/2010CE(NT)dated22ndJune,2010 hasamendedthedefinitionofcapitalgoodsunderRule2(a)oftheCENVATCredit Rules, 2004 whereby CENVAT credit would be available for excise duty paid on dumpersortippersfallingunderChapter87ofthefirstscheduleoftheCETA,1985 registeredinthenameofserviceproviderforprovidingtaxableservicesof1)site formation&clearance,excavation&earthmoving&demolition&suchothersimilar activities (Section 65(105)(zzza)) & 2) mining of mineral, oil or gas (Section 65(105)(zzzy)). Central Government vide Notification No.36/2010ST dated 28th June, 2010 has exemptedanyconsiderationreceivedasadvancebefore1stJuly,2010inrespectof newlyintroducedtaxableservices&serviceswhosescopeisexpanded(otherthan taxable services of commercial training or coaching services (Section 65(105)(zzc))&rentingofimmovablepropertyservices(Section65(105)(zzzz))) fromwholeofservicetax Central Government vide Notification No.37/2010ST dated 28th June, 2010 has amended Notification No.17/2009ST dated 7th July,2009 whereby refund of service tax to exporter on specified services is extended to services classified U/s. 65(105)(zzm)providedinanyairportinrespectofexportgoods. Central Government vide Notification No.38/2010ST dated 28th June, 2010 has exempted the taxable services of commercial or industrial construction (Section 65(105)(zzq)) provided wholly within the port or other port for construction, repair, alteration and renovation of wharves, quays, docks, stages, jetties, piers & railwaysfromwholeofservicetax.Thisexemptioniseffectivefrom1stJuly,2010. Central Government vide Notification No.39/2010ST dated 28th June, 2010 has inserted4thprovisotoRule4A(1)oftheServiceTaxRules,1994w.e.f.1stJuly,2010 wherebyincaseoftaxableserviceprovidedbyaircraftoperatorprovidingserviceof air transport of passenger, invoice/bill/challan shall include ticket in any form by
whatever name called and the same need not contain registration no. of service provider,classificationoftheservicereceivedandaddressoftheservicereceiver. Central Government vide Notification No.40/2010ST dated 28th June, 2010 has amended Notification No.1/2006ST dated 1st March,2006 whereby benefit of abatementisextendedtofollowingservicesrenderedinport(Section65(105)(zn)), other port (Section 65(105)(zzl)) or airport (Section 65(105)(zzm)). This exemptioniseffectivefrom1stJuly,2010. Sr.No NameofTaxableService (i) 1) 2) 3) 4) 5) 6) 7) 65(105) RentaCabOperator(o) Erection,Commissioningor Installation(zzd) CommercialorIndustrial Construction(zzq) CommercialorIndustrial Constructionrenderedbybuilder orauthorizedperson(zzq) ConstructionofComplex(zzzh) Section%of Taxpayable Abatement 60 67 67 75 67 on% 40 33 33 25 33 25 30
ConstructionofComplexbybuilder 75 orauthorizedperson(zzzh) TransportofGoodsbyRail(zzzp) 70
All the conditions mentioned in Notification No.1/2006ST dated 1st March, 2006 wouldapplytoaboveabatements. Central Government vide Notification No.41/2010ST dated 28th June, 2010 has exempted following taxable services provided wholly within the port/other port/airportfromwholeofservicetaxw.e.f1stJuly,2010: i)Cargohandlingservicesinrelationto agriculturalproduceorgoodsintendedto bestoredinacoldstorage. ii)Storage&warehousingservicesinrelationtoagriculturalproduceoranyservice providedbycoldstorage. iii)Transportofexportgoodsinanaircraft iv) Site formation and clearance, excavation and earthmoving and demolition and suchothersimilaractivities.
Central Government vide Notification No.42/2010ST dated 28th June, 2010 has exempted the taxable service of commercial or industrial construction (Section 65(105)(zzq))providedwhollywithintheairportfromwholeofservicetaxw.e.f. 1stJuly,2010. Central Government vide Notification No.43/2010ST dated 30th June, 2010 has amendedNotificationNo.13/2008STdated1stMarch,2008wherebyabatementof 75%availabletoservicesoftransportofgoodsbyroadinagoodcarriage(Section 65(105)(zzp)) is extended to GTA services rendered within port/other port/airport. Central Government vide Notification No.44/2010ST dated 20th July, 2010 has amended the Service Tax Return Preparer Scheme, 2009 whereby the age restrictionof35yearsforenrollingtoactasanServiceTaxReturnPreparerisdone awaywith. Central Government vide Notification No.45/2010ST dated 20th July, 2010, in exercise of powers conferred by Section 11C of the Central Excise Act, 1944 read withSection83oftheFinanceAct,1994,hasdirectedthattheservicetaxpayableon taxableservicesrelatingtotransmissionanddistributionofelectricityprovidedup to 26th February, 2010 & service tax payable on taxable services relating to distribution of electricity up to 21st June, 2010 which was not being levied in accordance with general trade practice is not required to be paid. Central Government vide Circular No.124/6/2010TRU dated 29th June,2010 has notified accountcodesfornewlyintroducedservices. Sr. No 1) TaxableService Serviceofpromoting, marketingororganizingof gamesofchance,including lottery,BingoorLotto [Section65(105)(zzzzn)] Healthservice[Section65 (105)(zzzzo)] Serviceofmaintenanceof medicalrecordsof employeesofbusiness entity [Section65(105)(zzzzp)] Accounting TaxOtherDeduct Refunds Code CollectionReceipts 00440595 00440596 00440597
2) 3)
00440598 00440601
00440599 00440602
00440600 00440603
4)
Serviceofpromotinga 00440604 00440605 brandofgoods,services, events,businessentities,etc [Section65(105) (zzzzq)] Serviceofpermitting 00440607 00440608 commercialuseor exploitation ofanyeventorganizedbya personororganization [Section65(105)(zzzzr)] Serviceprovidedby electricityexchange [Section65(105)(zzzzs)] 00440610 00440611
00440606
5)
00440609
6)
00440612
7)
CopyrightServices[Section 00440613 00440614 65(105)(zzzzt)] Specialserviceprovidedby 00440616 abuilderetc,tothe prospectivebuyers[Section 65(105)(zzzzu)] 00440617
00440615
8)
00440618
i) The subhead other receipts is meant for interest, penalty, leviable on delayed paymentofservicetax. ii)Thesubheaddeductrefundsisnottobeusedbytheassessees,asitismeant fortheRevenue/Commissionerateswhileallowingrefundoftax iii) The accounting codes for Primary Education Cess (00440298) and Secondary HigherEducationCess(00440426)remainunchanged. CentralGovernmentvideLetterF.No.332/16/2010TRUdated24thMay,2010has clarified on the issue related to leviability of service tax on construction of residential house by National Building Construction Corporation Ltd. (NBCC) for CentralGovernmentofficers.Inpara2,itisclarifiedthatthedefinitionofresidential complex (Section 65(91a)) does not include a complex which is intended for personaluseasresidencebyrecipientofservice.Thetermpersonaluseisdefined toincludepermittingtheuseofcomplexasresidencebyanotherpersononrentor withoutconsideration.Inpara3,itisfurtherclarifiedthattheresidentialcomplex builtbyNBCCforpersonaluseofGovernmentofIndiaisnotleviabletoservicetax.
CentralGovernmentVideCircularNo.126/8/2010STdated10thAugust,2010has clarifiedthatunderwritingfees/commissionreceivedbyPrimaryDealersduringthe course of dealing in Government Securities is not liable to service tax since Government securities are sovereign securities having zero default risk and the same are not securities issued by a Body Corporate which is prerequisite for taxabilityunderthecategoryofunderwritingservices(Section65(116)&Section 65(117)). CentralGovernmentVideCircularNo.127/9/2010STdated16thAugust,2010has clarified that in absence of link between consideration and the taxable service, service tax is not leviable on donations and grantsinaid received by a Charitable Foundation imparting free livelihood training to the poor and marginalized youth, sincedonationorgrantinaidisnotspecificallymeantforapersonreceivingsuch trainingortothespecificactivity,butthesameisingeneralmeantforthecharitable causechampionedbysuchFoundation.Betweentheproviderofdonation/grantand the trainee, there is no relationship other than universal humanitarian interest. CBEC vide Circular No.128/10/2010ST dated 24th August, 2010 has clarified as follows: W.e.f. 1st June, 2007 when the new service Works Contract Service was made effective, classification of existing services (i.e. Erection Commissioning or Installation,CommercialConstruction&ConstructionofComplex)wouldundergoa changeincaseoflongtermcontractseventhoughpartoftheservicewasclassified undertherespectivetaxableservicepriorto1stJune,2007.Thisisbecauseworks contractdescribesthenatureoftheactivitymorespecificallyand,therefore,asper theprovisionsofsection65AoftheFinanceAct,1994,itwouldbetheappropriate classificationforthepartoftheserviceprovidedafterthatdate.Incaseacontract wheretheprovisionofservicecommencedpriorto1stJune,2007andanypayment ofservicetaxwasmadeundertherespectivetaxableservicebefore1stJune,2007, theconditionunderrule3(3)ofWorksContract(CompositeSchemeforPaymentof Service Tax) Rules, 2007 was not satisfied and thus no portion of that contract wouldbeeligibleforcompositionscheme. Ontheotherhand,eveniftheprovisionofservicecommencedbefore1stJune,2007 butnopaymentofservicetaxwasmadetillthetaxpayeroptedforthecomposition scheme after its coming into effect from 1st June,2007, such contracts would be eligibleforoptingofthecompositionscheme. The Boards previous Circular No. 98/1/2008ST dated 4th January,2008 and the ratio of judgment of the Honble Andhra Pradesh High Court in the matter of M/s. NagarjunaConstructionCompanyLimitedvs.GovernmentofIndia(2010TIOL403 APHC)areinlinewiththeaboveinterpretation.
IncidenceandLevyofServicesTax

1.LAWGOVERNINGSERVICETAX 1.1ThereisnoseparateActorlegislationforservicetax.ChapterVoftheFinance Act,1994(sections64to96)andChapterVAoftheFinanceAct,1994(sections96A to 96I) both the Chapters together are hereinafter referred to as the Act, as amendedfromtimetotime,provideforthelevyofservicetaxandconstitutethelaw governingservicetax.TheGovernmenthasalsonotifiedthefollowingrules: (i)(CompositionSchemeforPaymentofServiceTax)Rules,2007ServiceTaxRules, 1994 (ii)CenvatCreditRules,2004 (iii)ServiceTax(AdvanceRuling)Rules,2003 (iv)ExportofServicesRules,2005 (v)Servicetax(RegistrationofSpecialCategoryofPersons)Rules,2005 (vi)TaxationofServices(providedfromoutsideIndiaandreceivedinIndia)Rules, 2006 (vii)ServiceTax(DeterminationofValue)Rules,2006 (viii)WorksContract (ix)ServiceTax(PublicationofNames)Rules,2008 (x)ServiceTaxDisputeResolutionScheme,2008 (xi)ServicetaxReturnPreparerScheme,2009. 1.2TheActisadministeredbytheExcisedepartment.Therateofservicetaxis12% (w.e.f.24.2.2009theeffectiverateis10%byvirtueofexemptionunderNotification No.8/2009ST).Further,theFinance(No.2)Act,2004hasleviedaneducationcess @2%ontheamountoftheservicetaxw.e.f.10.9.2004andFinanceAct,2007has leviedanadditionalsecondaryandhighereducationcess@1%ontheamountof service tax w.e.f 11.5.2007. Thus, presently the effective rate of Service Tax is 10.30%.
2.PRELIMINARYLEGALPROVISIONS TerritorialJurisdictionSection64 2.1Bysection64(1),theActextendstothewholeofIndiaexceptthestateofJammu andKashmir,andbysection64(3),thelevyappliestotaxableservicesprovided. ChargeofServiceTaxSection66 2.2Section66isthechargingsectionoftheAct,whichprovidesthatthereshallbe leviedaservicetax@12%[effectiveratereducedto10%bywayofnotification]of thevalueoftaxableservicesreferredtoinsection65(105)oftheAct.Thus, (a)thechargeisontheservicesprovided; (b)theservicesprovidedmustbeonewhichiscoveredinsection65(105)alistof whichisgiveninAnnexure1; (c)therateoftaxis12%[Reducedto10%bywayofnotification]; (d)themeasureoftaxisonvalueoftaxableservicesprovidedwhichisdefinedin section67. Threepropositions 2.2Threepropositionsemanatefromtheabove[s.64(1),s.64(3)&s.66]: (i)Theremustbeaservice (ii)Theservicemustbeataxableservice (iii)Theservicemustbeprovided[inIndia?] NoService,NoServicetax 2.3Itisclearonreadingofsection66whichisthechargingsectionthatinorderto be liable for service tax there must be a service. Service tax is a tax on services provided.Ifthereisnoservice,thereisnotax.[Addition Advertising vs. UOI(1998) 98ELT14(Guj.); CCE vs. Cochin International Airport Authority(2009)16STR401 (Ker)]. Thus, the taxable event which gives rise to the charge of service tax is the provisionofservice. Taxableeventservicesprovidedortobeprovided 2.4 As explained in para 2.2 the charge is on the value of taxable services. Section 65(105)definestaxableserviceasanyserviceprovidedortobeprovidedtoany person,client,customer,etc.Thus,thedefinitionoftaxableservicestructurally consists of three components viz., the service provider; the service recipient; the natureofservice. 2.5 Further, section 65(105) which defines taxable services covers services provided;and(b)servicesagreedtobeprovidedwithintheambitofservicetax. Theintentionistocollecttaxwhenadvancepaymentsarereceivedforservicesto
be provided. Thus, service tax would bepayable even on advancesreceived. Thus, thetaxableeventswouldbetwo (a)aserviceprovided;and (b)aserviceagreedtobeprovided. Taxable event with regard to services provided is identified by the time of provisionoftheserviceandwithregardtoservicestobeprovidedisidentifiedby time of payment towards value of service to be provided. This has a significant bearingontherateoftax. 2.6 Thus where there has been provision of services but no monies towards the valueofserviceshasbeenreceivedtherateoftaxprevailingatthetimeofprovision ofservicewouldapply.Similarly,incaseswheremoneyhasbeenreceivedtowards thevalueofservicebuttheservicesareyettobeprovided,therateoftaxprevailing atthetimeofreceiptofpaymenttowardsthevalueofserviceswouldapply. Placeofprovisionofservices WhethertheservicesmustbeprovidedinIndia? 2.7Onareadingofsection64(3)andsection66itisclearthatthetaxableeventis the provision of service. However, unlike other enactments neither section 64 nor thechargingsectionviz.,section66containanexpressprovisionoftheplacewhere thetaxableeventi.e.provisionofservicesmusthappen.Forexamplebysection3 oftheCentralExciseAct,1944thelevyofexcisedutyfallsongoodsmanufactured in India. Similarly the Incometax Act also provides for specific place where the incomemustaccrueorariseordeemedtoaccrueorariseorreceivedordeemedto bereceived.Section4whichisthechargingsectionprovidesthatincometax shall be charged .in respect of the total income. Section 5 dealing with thescopeoftotalincomeprovidesthat (i)thescopeofthetotalincomeofaresidentassesseewouldbeincomesaccruingor arisingordeemedtoaccrueorariseinIndiaaswellasoutsideIndiaorreceivedor deemedtobereceivedinIndia. (ii) the scope of the total income of a nonresident assessee would be incomes accruingorarisingordeemedtoaccrueorarise in Indiaorreceivedordeemedto bereceivedinIndia. 2.8SimilarlytheUnitedKingdomVATAct,1994bysection1providesasfollows: 1.Valueaddedtax.Valueaddedtaxshallbecharged,.. (a)onsupplyofgoodsorservicesintheUnitedKingdom. Furthersection4readsasfollows: 4.ScopeofVATontaxablesupplies: (1)VATshallbechargedonanysupplyofgoodsorservicesmadeintheUnited Kingdom,
2.9IntheIndianServiceTaxLawthewordinisout! 2.10Onaconjointreadingofsections64(1),64(3)and66oftheActonemayinfer that it is implicit in the scheme of the Act that the taxable event i.e. provision of servicesmusthappeninthetaxableterritoriesi.e.India. 2.11 This proposition was also substantiated by Circular No. 36/4/2001ST dated 8.10.2001whichclarifiedthepositionasfollows: TheexpressionIndiaincludestheterritorialwatersofIndia.Indianterritorial watersextenduptotwelvenauticalmilesfromtheIndianlandmass.ChapterV oftheFinanceActwhichgovernsthelevyofServiceTaxhasnotextendedtothe levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India (as has been done in case of Central Excise vide Notification No. 166/87C.E.,dated11687andincaseofCustomsbyNotificationNos.11/87 Cus., Dated 14187 & 64/97Cus., dated 11297). It is, therefore, clarified that the services provided beyond the territorial waters of India are not liabletoServiceTaxasprovisionsofServicetaxhavenotbeenextendedto suchareassofar. Thus the services must be provided in India. [Circular also referred in Coen Company v. CCE (A) (2006)2STR488(Tri.Bang.); Foster Wheeler Energy Ltd. vs. CCE(2007)7STR443(Tri.Ahd.)andIndianNationalShipownersAssociationv.UOI (2009)13STR235(Bom.)].ThispropositionhasalsobeenstatedbytheSupreme Court in All India Fedn. of Tax Practioners vs. UOI (2007) 7 STR 625(SC) where in para20theCourtobserved 20.Onthebasisoftheabovediscussion,itisclearthatservicetaxisVATwhich in turn is both a general tax as wall as destination based consumption tax leviableonservicesprovidedwithinthecountry. 2.12 W.e.f. 1.3.2002India included designated areas in the Continental Shelf and Exclusive Economic Zone of India [notification no. 1/2002 dated 1.3.2002]. However,thesaidNotificationNo.1/2002hasnowbeensupersededbyNotification No.14/2010dated27.2.2010whichhasextendedtheprovisionsofChapterVofthe FinanceAct,1994tothefollowingareaspurposewise Sr. The areas in the CSI Purpose No. andEEZ 1 Whole of continental Any service provided for all activities shelf and exclusive pertaining to construction of economic zone of India installations, structures and vessels for [i.e. 200 nautical miles the purposes of prospecting or
fromshore] The installations, structures and vessels within the continental shelf and the exclusive economic zone of India, constructed for the purposes of prospecting or extraction or productionofmineral,oil andnaturalgas
extractionorproductionofmineral,oil andnaturalgasandsupplythereof. Anyserviceprovidedortobeprovided by or to such installations, structures andvesselsandforsupplyofanygoods connectedwiththesaidactivity.
2.13 Thusthefollowingserviceswouldbecovered. (i)AnyServicesprovidedwithintheterritorialwatersofIndiai.e.upto12nautical miles; (ii)Asregardsservicesprovidedbetween12nauticalmilesand200nauticalmiles onlytheabovetwoserviceswouldbecovered. ServicesprovidedinIndiawhatdoesitmean? Providedperformedorsupplied? 2.14 ThenextissueisforaservicetobetreatedasbeingprovidedinIndia (i)whethertheservicesmustbeperformedinIndia?or (ii)whethertheservicesmustbesuppliedinIndia? If it is interpreted as services performed in India the taxable base would be service provider centric. If it is interpreted as services supplied in India the taxablebasewouldbeservicereceiver/customercentric. Performed
Provided
Supplied
Service provider centric
Service receiver / customer centric
Theaboveisrelevantsinceinatypicalcrossbordertransactioninvolvingimportof services,say,fromUSAifthetermprovidedisinterpretedasperformedthenthe serviceproviderinUSAbeingoutsidetheIndiantaxableterritoriesthetransaction wouldnotattractservicetaxinIndia.However,ifthewordprovidedisinterpreted to mean supplied then the service recipient being in India the transaction would attractservicetaxinIndiaeveniftheserviceproviderisinUSA. Departmental clarifications Advancing the concept that provided means performed. 2.15 In this context the following departmental clarifications may be referred. In caseoftouroperatorsthedepartmenthasclarifiedvidepara2.6ofM.F.(D.R.)letter F.No.43/10/97TRUdated22.8.97asfollows Service tax on services rendered by tour operators is only on services rendered in India in respect of a tour within Indian territory. Services rendered by tour operators in respect of outbound tourism; i.e., for tours abroad, do not attract service tax. In case of a composite tour which combines tours within India and also outside India, service tax will be leviable only on services rendered for tours within India provided separate billinghasbeendonebythetouroperatorforservicesprovidedinrespectof tourswithinIndia. Thisadvancestheconceptthatthe situsoftaxationisonservices renderedwithin thetaxableterritories. 2.16IncaseofMarketresearchagenciesTradeNoticeNo.7/98ServiceTaxdated 13.10.1998issuedbyCommissionerofCentralExcise,Mumbai1,basedonCircular F. No. B 11/3/98TRU dated 71098, issued by Ministry of Finance Dept. of Revenue,TaxResearchUnitclarifiesasfollows: 6.3Anissuehasbeenraisedwhetherservicetaxispayableinrespectofservices rendered to foreign clients in India, and in respect of such services rendered abroad.Itisclarifiedthatservicetaxispayableonalltaxableservicesrenderedin IndiawhethertoanIndianorforeignclient.However,services renderedabroad shall not attract service tax levy as service tax extent only to services provided withinIndia. 2.17 Thus, the situs of taxation has beeninterpreted to mean services rendered in India and hence the word provided is to be interpreted as rendered. The term render,accordingtotheBlacksLawDictionary6thEditionmeans: Togiveup;toyield;toreturn;tosurrender;Alsotopayor perform;usedas rents,servicesandthelike. Thetermrenderedalsomeansperform(inthepresentcontext).Henceitmaybe concludedthatitisonlyservicesperformedinIndiathatwouldattractservicetax.
Departmental clarifications Advancing the concept that provided means supplied. 2.18CircularNo.56/5/2003dated25/04/2003issuedbytheMinistryofFinancein thecontextofinterpretationofexportofservices[muchbeforetheintroductionof ExportRules]hasstatedasfollows: 3.TheBoardhasexaminedtheissue.InthisconnectionIamdirectedtoclarifythat the Service tax is destinationbased consumption taxanditisnotapplicableon exportofservices.Exportofserviceswouldcontinuetoremaintaxfreeevenafter withdrawalofNotificationNo.6/99dated09/04/1999. Thus, as per the above Circular, services are deemed to be provided where the services are consumed. Accordingly the taxable base could be considered as customercentric. Whether services are provided in India ? to decide Place of Supply Rules required 2.19Onareadingofparas2.15to2.19itappearsthatthetermserviceprovided couldbeinterpretedasperformedorsupplied.Consideringthediversenatureof services the word provided could be performed in India or supplied in India dependingonthenatureofservice.Forinstance,incaseofcargohandlingservices (CHS)orrentacaboperator(RCO)wherephysicalperformanceoftheserviceisa decisive factor, the term provided in India may be interpreted as performed in India.However,inaservicelikemanagementconsultancyservice(MCS),whichis of an intellectual nature the term provided in India may be interpreted as supplied in India. Hence, there is a requirement for a Place of Supply Rules providingwheretheserviceisconsideredtobeprovideddependingonthenature ofservice.
Situs of Taxation
Service provider centric or customer centric ?
Services provided in India what does it mean ? Provided
Performed
Supplied
Service provider centric

CHS, RCO, etc.
Service receiver / customer centric

MCS, etc.
Could be both ? Place of Supply Rules required
2.20IntheUKVATAct,1994therearePlaceofSupplyRulestodeterminewhere theservicesaresuppliedandaccordinglytheterritorialjurisdictionfortaxation.If onanapplicationofthesaidrules,theplaceofsupplyisUKthentheUKVATwould beattracted. In India, the place of supply is not specifically embodied in the Act as in the UK. However,rulesakintoPlaceofSupplyRulesforspecificcategoriesofserviceshave been provided for exports and imports known as Export of Services Rules, 2005 (ExportRules)effectivefrom15.3.2005andTaxationofServices(Providedfrom Outside India and Received in India) Rules, 2006 (Import Rules) effective from 19.4.06.Further,section94oftheActhasalsobeenamendedbyFinance(No.2)Act, 2009 so as to empower the Central Government to make rules inter alia for determinationofplaceofprovisionoftaxableservices.Theaboveruleswhenmade would be a major land mark in the advancement of the service tax law in India. However,itistobeseenhowsimpleitwouldbetooperate. ImportofServices&ExportofServices 2.21 The Finance Act, 2006 introduced a new section 66A to bring certain cross bordertransactionsinvolvingoverseasserviceproviderswithintheambitofservice tax.Ineffectithasbroughtcertainservicesprovidedbyoverseasserviceproviders withinthepurviewofservicetax.InsuchcasestherecipientoftheservicesinIndia wouldbeliabletoregisterandpayservicetax.Thisisknownasthereversecharge mechanism. Taking into account international practices the Taxation of Services
(provided from outside India and received in India) Rules, 2006 (Import Rules) has been notified w.e.f. 19.4.2006. These Rules inter alia specify when a taxable service is to be treated as supplied in India and accordingly coming within the Indianservicetaxnet.ThisisakintoPlaceofSupplyRules. 2.22 The Export Rules set out the criteria to decide when a service is deemed to havebeenexported,keepinginviewthenatureofthedifferenttaxableservices. 2.23Theaboveprovisionsviz.ImportofServicesandExportofServiceswouldbe presumablydealtinlaterarticles. 3.NATUREOFSERVICETAX ServicetaxisanindirecttaxakintoVATonthesupplyofservices 3.1TheSupremeCourtin All India Federation of Tax Practitioners vs. Union of India (2007)7STR625(SC)explainedthenatureoftaxasfollows: 6.Atthisstage,wemayrefertotheconceptofValueAddedTax(VAT),whichisa general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is bornebytheconsumer. 7.Inthelightofwhatisstatedabove,itisclearthatServiceTaxisaVATwhichin turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a valueaddedtax. NatureofEducationCessandSecondaryandHigherEducationCess 3.2 Education cess is levied on taxable services by virtue of section 95(1) of the Finance(No.2)Act,2004.Subsection(3)ofsection95providesthattheprovisions ofChapterVoftheFinanceAct,1994andtherulesmadethereunderwouldapplyin relation to Education Cess as they apply to Service Tax. Similarly, Secondary and Highereducationcessisleviedontaxableservicesbyvirtueofsection140(1)ofthe FinanceAct,2007andbyvirtueofsubsection(3)thereoftheprovisionsofChapter VoftheFinanceAct,1994andtherulesmadethereunderwouldapplyinrelationto SecondaryandHigherEducationCessastheyapplytoServiceTax. Selectivevs.ComprehensiveCoverage 3.3Dependingonthesocioeconomiccompulsions,eachcountryevolvedataxation system on services adopting either a comprehensive approach or a selective approach. All services are taxable under the comprehensive approach unless they are specifically excluded, whereas under the selective approach only specified
servicesaretaxable,asystemwhichIndiahasadopted.Alistofservicespresently liableforservicetaxisgiveninAnnexure1. 4.GAMUTANDCOVERAGEOFSERVICETAXLAW 4.1Thelawgoverningservicetaxmayaffectapersoninthefollowingways: a. As a service provider :Anassesseemaybeliableforservicetaxasaproviderof anyofthe117categoriesofservicesmentionedhereinafterinAnnexure1attached herewithexceptinexceptionalcircumstancesstatedbelowinpara(b). b. As a service receiver : Thefollowingarethecaseswheretheavailerofservices isliabletopayservicetax: (i)ServicesreceivedfrompersonsbasedoutsideIndiaservicereceivertopay In case of taxable services provided by a person who is based outside India1 and received by a person based in India2 in accordance with section 66A it is the recipientoftheservicewhoisliableforpayingservicetax. (ii) Insurance Companies to pay service tax in respect of services provided by insuranceagents In case of insurance auxiliary services, relating to general insurance and life insuranceprovidedbyaninsuranceagent,servicetaxshallbepaidbythegeneral insurance company or the life insurance company carrying on business in India whichhasappointedtheagent. (iii)Mutual fund / asset management companies to pay service tax on mutual funddistributionservices Incaseswheretheservicesofdistributionofmutualfundareprovidedbyamutual funddistributororanagent,themutualfundorassetmanagementcompanywhois receivingsuchservicewouldbeliabletoregisterandpayservicetax. (iv)Sponsoroftheeventtopayservicetaxincaseofsponsorshipservices. In case of sponsorship services the recipient of service namely the person who sponsors the event would be liable to pay service tax. The recipient of service is required to pay service tax only if he is located in India. Thus in case of foreign sponsorships; i.e., where the sponsor is located outside India, it would be the provider of services i.e., the sponsored organisation which would be liable to pay servicetax.
1 2
The service provider has a business establishment or a fixed establishment or usual place of residence or permanent address in a country outside India. The service recipient has a business establishment or a fixed establishment or usual place of residence or permanent address in India.
a.AsapayerofserviceServicesprovidedbyagoodstransportagency In the case of services provided by a goods transporting agency, where the Consignor or Consignee of goods is a specified entity viz., a factory, a company, a statutorycorporation,asociety,acooperativesociety,adealerofexcisablegoods,a body corporate or a partnership firm the person liable to pay service tax is the person who is liable to pay the freight either himself or through his agent for the transportationofgoods. N.B. It is to be noted that where neither the consignor nor the consignee is any of the specified entities mentioned above it would be the goods transport agency which wouldbeliabletopayServiceTaxinsuchcases. Vendorliability:Inabusinessentitymanysuppliers/vendorschargeservicetax. Theincidenceofservicetaxontheseservicesispassedontotheavailerofservices. Thus,anavailerofserviceshastobeconversantwiththeservicetaxprovisionsdue totwoimportantreasons (i)Fromaneconomicstandpoint,sincehebearstheburdenoftax,whichaddstohis costs,hemustcheckwhetherthesupplierislegallycorrectinchargingservicetax onhisservices; (ii) From a procedural standpoint, he may be entitled to input tax credit if the availerisalsoprovidingthetaxableservice. 5.DEFINITIONSSECTION65 5.1 This section contains definitions of various important terms used in the Act. SinceIndiahasadoptedtheselectiveapproachoftaxingonlyspecifiedservicesitis necessarytodefinethevariousservicecategories/serviceproviderscoveredinthe taxnet.Thesedefinitionsarecontainedinsection65oftheActandformthecruxof theentireAct.ThecategoriesofservicestowhichtheActapplieshasbeendefined bythetermtaxableservicewhichiscontainedinsection65(105)oftheAct. 5.2 Section 65(105) defines taxable service as any service provided or to be provided to a client, customer, etc. This definition contains various subclauses whichdefinetaxableserviceinthecontextofeachservice.Forexample,taxable serviceinthecontextofgeneralinsuranceisdefinedasfollows: (105)taxableservicemeansanyserviceprovidedortobeprovided (a)to(c) (d)toapolicyholderoranyperson,byaninsurerincludingreinsurercarrying ongeneralinsurancebusinessinrelationtogeneralinsurancebusiness. (e)to(zzzzj)
Thetermtaxableserviceissimilarlydefinedinthecontextofotherservicessuch as stock broker, telecommunication, advertising, etc. and structurally consists of threecomponentsviz., (i)theserviceprovider; (ii)theservicerecipient; (ii)thenatureofservice. The service provider is also defined in the case of several services for eg. advertising agency, stock broker, etc. The nature of service is also defined in manycases.Forexample,bankingandfinancialservices,etc. 5.3 The definitions are inclusive and exhaustive and the general principles applicable to construing such definitions must be applied3. One such helpful principleparticularlyhelpfulinthecaseofservicetaxisthataphrasedefinedina statute must itself be interpreted in a manner appropriate to the phrase defined. Thisissubstantiatedbythefollowingjudgments. (i)In Hotel and Catering Industry Training Boardv. AutomobileProprietary Limited (1968) 3 All. E.R. 399, p. 402E, Lord Denning speaking for the Court of Appeal explainedasunder: It is true that the industry is defined; but a definition is not to be read in isolation.Itmustbereadinthecontextofthephrasewhichisdefined,realizing that the function of a definition is to give precision and certainly to a word or phrasewhichwouldotherwisebevagueanduncertainbutnottocontradictit orsupplantitaltogether. (ii)In I.L.M. Cadija Umma and Anotherv. Don Manis Appu AIR1939PrivyCouncil 63(atpage65),theprinciplewasexplainedasunder: A phrase having been introduced and then defined, the definition prima facie must entirely determine the application of the phrase; but the definition must itself be interpreted, in case of doubt, in a sense appropriate to the phrase definedandtothegeneralpurposeoftheenactment. (iii) In Hariprasad Shivshankar Shukla v. A.D. Divelkar AIR 1957 SC 121, the SupremeCourtheld: Itistruethatanartificialdefinitionmayincludeameaningdifferentfromorin excessoftheordinaryacceptationofthewordwhichisthesubjectofdefinition; buttheremustthenbecompellingwordstoshowthatsuchameaningdifferent from or in excess of the ordinary meaning is intended. Where, within the frameworkoftheordinaryacceptationoftheword,everysinglerequirementof
G. P. Singh on Principles of Statutory Interpretation; Maxwell on The Interpretation of Statutes; Craies on Statutes, etc. contain excellent exposition on these principles.
the definition clause is fulfilled, it would be wrong to take the definition as destroyingtheessentialmeaningoftheworddefined. To illustrate this point we take the definition of Business Auxiliary Services. The expression which is defined is Business auxiliary services. This entry therefore presupposes that the services which fall within this category would essentially be auxiliary to a business. Thus, the client must in the first place carryon a business. This, interpretation would be appropriate to the phrase defined. Thus where the client (Government) carriedon sovereign functions not amounting to business the activity of the assessee who provided services to the Government cannot be considered to be business auxiliary services. [CCE vs. Ankit Consultancy Ltd. (2007)6STR101(TriDel.)].Thisprinciplehasalsobeenappliedinconstruing the meaning of the term advertising agency [Zee Telefilms Ltd. vs. CCE (2006) 4 STR349(Tri.Mumbai); See Contra CCE vs. Zodiac Advertisers(2009)13STR593 (Ker.)]. 5.4 Many of the terms have been assigned the meanings they have in other enactments. For example, actuary as per S. 2(i) of InsuranceAct, 1938; banking company as per S. 45A(a) of the Reserve Bank of India Act, 1934; motor cab, maxicab,motorcarandmotorvehicleaspertheMotorVehiclesAct,1988;and soon. 5.5 Words and expressions used but not defined in the Act and defined in the Central Excise Act, 1944 or the rules made there under shall have application mutatismutandis. 6.GENERALEXEMPTIONS Services provided to UN or International Organization exempt [Not. No. 16/2002S.T.dated2.8.2002] 6.1 All taxable services, provided by any person to the UN or International Organizations are exempt. International Organization means an international organization declared by the Central Government in pursuance of Section 3 of the UnitedNations(PrivilegesandImmunities)Act,1947,towhichtheprovisionsofthe ScheduletothesaidActapply. Exemption from Service tax on Services provided to a developer or unit of SpecialEconomicZone(SEZ)[9/2009S.T.,dated3rdMarch,2009] 6.2W.e.f.3rdMarch2009,theGovernmentofIndia,MinistryofFinancehasissueda Notification No. 9/2009 S.T., dated 3rd March, 2009 exempting taxable services providedtothedeveloper/unitofSEZinrelationtoauthorizedoperationswhether or not the said taxable services are provided inside the SEZ subject to the certain
conditions. The earlier notification No.4/2004 dated 31.03.2004 has been withdrawn/superceded. Exemptioninrespectofvalueofgoodsandmaterialsfromthevalueoftaxable service[Not.No.12/2003S.T.dated20.6.2003readwithNot.No.12/2004S.T. dated10.9.2004] 6.3 Value of goods and materials sold by a service provider to the recipient of service is exempt from service tax subject to documentary proof specifically indicatingthevalueofthesaidgoodsandmaterials.Thisexemptionissubjecttothe followingconditions (i)thatnocreditofdutypaidonsuchgoods/materialsistaken;or (ii) where such credit has been taken, an amount equal to the amount of credit availedispaidbeforethesaleofsuchgoods/materials. ReserveBankofIndiaexempt[NotificationNo.22/2006dated31.5.2006] 6.4AllTaxableServicesprovidedbyReserveBankofIndiaareexempt.Further,the ReserveBankisalsonotliabletopayservicetaxasrecipientoftheservicesorasa payeroffreight. Exemption schemefor smallservice providers minimum / threshold limit of Rs. 10 lakhs provided subject to conditions [Not. No.6/2005S.T. dated 1.3.2005(asamended)] 6.5ServiceTaxLawinspiteofbeing10yearsolddidnothaveaminimum/threshold limit. Even if a person renders taxable service for a paltry amount of Rs. 100/ he hadtoregisterandpayservicetax.TheCentralGovernmenthavingappreciatedthe requirement of minimum / threshold limit has issued notification No. 6/2005S.T. dated1.3.2005providingforanexemptionschemeforsmallserviceprovidersw.e.f. 1.4.2005. Thus, w.e.f. 1.4.2005 aggregate value of all taxable services upto Rs. 4 lakhsinafinancialyearprovidedfromoneormorepremisesshallbeexemptfrom servicetaxsubject inter alia tocertainconditions.W.e.f1.4.2007thislimitofRs.4 lakhswasincreasedtoRs.8lakhswhichisfurtherincreasedtoRs.10lakhsw.e.f. 1.4.2008.Theconditionstobesatisfiedareasfollows: Aggregate value of all taxable services rendered by a service provider from oneormorepremises,intheprecedingfinancialyeardoesnotexceedRs.10 lakhs. ThefollowingrestrictionsonavailmentofCENVATcreditapply: CENVATcreditoninputservicesandcapitalgoodsisnotavailed; An amount equal to the CENVAT credit taken on inputs lying in stock or in processonthedateonwhichthisexemptionisavailedwouldhavetobepaid; Unutilised balance of CENVAT credit shall lapse on the day the service providerstartsavailingtheexemption; CENVATcreditshallbeavailedonlyonsuchinputsorinputservices
(a)receivedonorafterthedateonwhichtheserviceproviderstartspayingservice tax,and (b)usedfortheprovisionoftaxableservicesforwhichservicetaxispayable; Calculationofmonetarylimits 6.6Theprovisionsregardingmonetarylimitscanbesummarizedasunder: (i)wherethepreviousyearsvalueoftaxableserviceprovidedexceedsRs.10lakhs, servicetaxwouldbepayableevenifthecurrentyearsturnoverislessthanRs.10 lakhs. (ii) where the previous years turnover is Rs. 10 lakhs or below and the current yearsturnoverexceedsRs.10lakhs,noservicetaxispayableuptoRs.10lakhsif thespecifiedconditionsarecompliedwith. Further,thesumtotaloffirstconsecutivepayments received duringthefinancial yeartowardsthetaxableservicesuptoRs.10lakhswouldbeexempt.Thepayments received towards wholly exempt services are to be excluded for determining the amountofRs.10lakhs. Thus,itappearsthat,whileconsideringthelimitofRs.10Lakhsofthecurrentyear, itisthepayment receivedforthetaxableservicethathastobeconsideredbutfor consideringthepreviousyearslimitofRs.10lakhs,itisthevalueoftaxableservice providedthathastobetaken. Theaboveexemptionwouldnotbeapplicableinthefollowingcases: 1) where taxable services are provided by a person under a brand name / trade nameofanotherpersonwhetherregisteredornot. Thus, service provided by a person under his own brand name would not be affectedbythisrestrictionandwouldbeentitledfortheexemption. 2)Whereservicetaxispayablebyaperson a)Asareceiverofservicee.g. (i)ServicesprovidedbyNonresidents/foreigncompanieswhodonothavean officeinIndia (ii)Servicesprovidedbyinsuranceagents (iii)Servicesprovidedbyamutualfunddistributor (iv)Servicesprovidedbyasponsor b)Asapayerofservicefortransportservices Thus, the exemption would apply only in cases where service tax is payable as a providerofservice. N.B.Theserviceproviderhastheoptionnottoavailtheexemptionandpayservicetax and such option, once exercised in a financial year, shall not be withdrawn during the remainingpartofsuchfinancialyear.
Services provided to foreign diplomatic mission or consular post in India is exempt[NotificationNo.33/2007S.T.dated23.5.2007]. 6.7 Taxable services provided by any person for the official use of a foreign diplomatic mission or consular post in India is exempt from service tax subject to complianceofcertainconditionsandprocedures. Services provided to family members of foreign diplomatic agents or career consular officers is exempt from service tax [Notification No. 34/2007S.T. dated23.5.2007] 6.8Theservicesprovidedbyanypersonforthepersonaluseorfortheuseoffamily members of diplomatic agents or career consular officers posted in foreign diplomatic mission or consular post in India is exempt from service tax subject to complianceofcertainconditionsandprocedures. Annexure1 Listofservicescoveredundertheservicetaxnet. S.No NatureofService EffectiveDate 1. StockBroking: i.Stockbrokers 01.07.94 ii.Subbrokers 10.09.04 2. GeneralInsurance 01.07.94 3. Advertising 01.11.96 4. Courier 01.11.96 5. ConsultingEngineer 07.07.97 6. CustomHouseAgent 15.06.97 7. SteamerAgent 15.06.97 8. Clearing&ForwardingAgent 16.07.97 9. ManpowerRecruitmentAgency 07.07.97 to 15.06.05 ManpowerRecruitmentorsupplyAgency 16.06.05onwards 10. AirTravelAgent 01.07.97 11. MandapKeeper 01.07.97 12. TourOperator 1.09.97 to 17.07.98 & 1.4.00 Onwards 13. Rentacabschemeoperator 16.07.97 to 27.02.99 & 1.4.00 Onwards 14. Architect 16.10.98 15. InteriorDecorator 16.10.98 16. ManagementandBusinessConsultant 16.10.98 17. PractisingCharteredAccountant 16.10.98
S.No 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32.
NatureofService PractisingCostAccountant PractisingCompanySecretary RealEstateAgent SecurityAgency CreditRatingAgency MarketResearchAgency Underwriter Scientificandtechnicalconsultancyservices Photographyservices Conventionservices Online information and database access or retrievalservices Videotapeproductionservices Soundrecordingservices Broadcastingservices Insurance auxiliary services relating to general insurance Banking and Other Financial services provided by: i. Banking companies, Financial Institutions and NBFCs i. Otherbodycorporates i. Noncorporatecommercialconcerns v. Anyperson v. Commercialconcerns Portservices(MajorPorts) Authorisedservicestationsforserviceandrepair of motor car and 2 wheeled vehicles and light motorvehicle. BeautyParlours CargoHandlingservices CableServices: - Cableoperators - MultiSystemoperators DryCleaningservices EventManagement FashionDesigners HealthClubandFitnessCentres Life Insurance business (taxable to the extent of
EffectiveDate 16.10.98 16.10.98 16.10.98 16.10.98 16.10.98 16.10.98 16.10.98 16.07.01 16.07.01 16.07.01 16.07.01 16.07.01 16.07.01 16.07.01 16.07.01 16.07.01 16.08.02 10.09.0430.4.06 1.5.06to31.05.07 01.06.07 16.07.01 16.07.01 16.08.02 16.08.02 16.08.02 10.09.04 16.08.02 16.08.02 16.08.02 16.08.02
33.
34. 35. 36. 37. 38. 39. 40. 41. 42. 43.
S.No 44. 45. 46. 47. 48. 49.
50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.
61. 62. 63. 64. 65. 66. 67. 68. 69. 70.
71. 72. 73.
NatureofService riskcovercomponent). Insurance auxiliary service relating to Life Insurancebusiness RailTravelAgents StorageandWarehousingservices Businessauxiliaryservice Commercialtrainingandcoaching Commissioningandinstallation Erection Franchise Internetcafprovidinginternetaccess Maintenanceandrepair Management,maintenanceandrepair Technicaltestingandanalysis TechnicalInspectionandcertification Forexbrokerotherthancorporatebrokers Portservices(Minorports) Airportservices Transportofgoodsbyair Businessexhibitionservices Goods transport agency which issues consignmentnote Constructionservices CommercialorIndustrialConstructionService Intellectualpropertyservices Opinionpollservices Outdoorcatering T.V.orRadioProgrammeproduction Surveyandexplorationofmineral Pandalorshamianaservices Travelagents(otherthanair/railtravelagents) Forwardcontractservices Transport of goods (other than water) through pipelineorotherconduit Site formation and clearance, excavation and earthmovinganddemolitionservices Dredgingservices Survey and map making services by a person other than an agency under the control of, or
EffectiveDate 10.09.04 16.08.02 16.08.02 16.08.02 01.07.03 01.07.03 01.07.03 10.09.04 01.07.03 01.07.03 01.07.03 to 30.4.06& 1.5.06onwards 01.07.03 01.07.03 01.07.03 01.07.03 10.09.04 10.09.04 10.09.04 01.01.05 10.09.04 to 15.06.05 16.06.05onwards 10.09.04 10.09.04 10.09.04 10.09.04 10.09.04 10.09.04 10.09.04 10.09.04 16.06.05 16.06.05 16.06.05 16.06.05
S.No 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91.
NatureofService authorizedby,theGovernment Cleaningservices Servicesofclubsorassociations Packagingservices Mailinglistcompilationandmailing Constructionofcomplexservices RegistrartoanIssue ShareTransferAgent Automated Teller Machine (ATM) operations, maintenanceormanagementservices Recoveryservices Saleofspaceortimeforadvertisement Sponsorshipservices Transportofpassengersbyair Transportofgoodsincontainersbyrail Businesssupportservices Auctioneersservice Publicrelationservices Shipmanagementservice InternetTelephonyservice
EffectiveDate 16.06.05 16.06.05 16.06.05 16.06.05 16.06.05 01.05.06 01.05.06 01.05.06
92. 93. 94. 95. 96. 97. 98. 99.
100. 101. 102.
01.05.06 01.05.06 01.05.06 01.05.06 01.05.06 01.05.06 01.05.06 01.05.06 01.05.06 01.05.06 15.5.08 InternetTelecommunicationservice 16.05.08 Transportofpassengersbycruiseship 01.05.06 Credit card, debit card, charge card or other 01.05.06 paymentcardrelatedservice Telecommunicationservices 01.06.07 ServicesinrelationtoMining 01.06.07 Renting of Immovable Property for commercial 01.06.07 purposes. Service provided in relation to execution of a 01.06.07 workscontract Developmentandsupplyofcontent 01.06.07 Asset management including portfolio 01.06.07 management and all forms of fund management provided by service providers other than those providingBankingandOtherFinancialservices Designservices 01.06.07 Information Technology Software Service used 16.05.08 forbusinessorcommerce Management of investment under Unit Linked 16.05.08 InsurancePlan(ULIP)Scheme
to
S.No 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117.
Conclusion TheabovetopicServicetaxIncidenceandLevy isatopicwhichisheavy forthebusinessitismessy fortheconsumersthingsbecomepricey forthegovernmentitisjuicey butfortheprofessionalsitisdicey andsometimestheexperienceisspicey!

NatureofService ServicesprovidedbyStockExchange ServicesprovidedbyCommodityExchange Services provided by Processing & Clearing House Supplyoftangiblegoodsforuse CosmeticandPlasticSurgeryServices Services provided in relation to transport of (i) coastal goods; and (ii) goods through inland waterincludingNationalWaterways LegalConsultancyServices Promotion, marketing, organising or assisting in organising games of chance including lottery, BingoorLotto Healthservicesprovidedbyhospitalsornursing homes for which payments are made by employersandhealthinsurancecompanies Maintenance of medical records of business entity BrandAmbassadorServices PermittingCommercialuseorExploitationofany event. ServicesprovidedbyElectricityExchanges Permitting use of copyright in (a) cinematographicfilmsand(b)soundrecording. Special services provided by builder etc. to the prospectivebuyersinaresidentialcomplexsuch as providing preferential location or external or internal development of complexes for extra charges.
EffectiveDate 16.05.08 16.05.08 16.05.08 16.05.08 01.09.09 01.09.09 01.09.09 01.07.10 01.07.10 01.07.10 01.07.10 01.07.10 01.07.10 01.07.10 01.07.10
ConsultingEngineerService
Where the assessee company executed a works contract of design, development, commissioningetc.,ofanoilfreecompressorsystemforitsclientduringtheperiod 19972001itwasheldthattheassesseeisnotliableunderconsultingengineering services (i) sinceservicesrenderedbycompanieswerenotliablepriorto1.5.2006under thiscategory; (ii) sincetheassesseecompanysservicefallunderworkscontractserviceswhich wasbroughtintotheambitofservicetaxonlyw.e.f.1.6.2007. [CSTvs.TurbotechPrecisionEngineeringPvtLtd,(2010)18STR.545(Kar)] Theappellant entered into a contract with IOCL for construction of a storage tank and certain utilities which involved drawing, designing and detailed engineering etc., and separate prices were demarcated for such activities. The department contendedthattheactivitiesofdrawing,designetc.wereliableunderthecategory of Consulting engineering services since after the 46th amendment to the Constitution a works contract can be vivisected and the service component of it could be subjected to service tax under the relevant entries. Dismissing this contentiontheTribunal(ThirdMemberbench)heldthat (i) The ruling in Daelims case [(2006) 3 STR 124 (TriDel.)] given by a division benchoftheTribunalholdingthataworkscontractcannotbevivisectedand partofitbesubjectedtoservicetaxandconsistentlyfollowedbycoordinate Benchesinnumeroussubsequentcasesisstillbindingoncoordinatebenches; (ii) The46thamendmenttotheconstitutionwasmadewithanintenttoenablethe States to levy sales tax on the sale component of a works contract. It did not purporttoenablethecentralexciseauthoritiestolevyanytaxontheservice componentofaworkscontract. Service portion of the works contract is subject to service tax levy only post (iii) 1.6.07andnotpriorto1.6.07 [CCE vs Indian Oil Tanking Ltd 2010 (18) STR 577 (TriMumbai) relying substantiallyonINSAvsUoI2009(14)STR289(Bomb.)]. WhenArticle366(29A)(b)totheconstitutionhasmadeindivisibleworkscontracts divisibletofindoutgoodscomponentandvaluethereof,itcanbeunambiguouslybe
stated that the remnant part of the contract may be attributable to the scope of servicetaxundertheprovisionsorFinanceAct,1994.Thus,turnkeycontractscan be vivisected and discernible service elements involved therein can be segregated and classifiable as well as valued for levy service tax under Finance Act, 1994 providedsuchservicesaretaxableservicesasdefinedbythatActanddependingon the facts and circumstances of each case, service by way of advice, consultancy or technicalassistanceinthecaseofturnkeycontractshallattractservicetax liability.[CCEvsBSBKPvt.Ltd2010(18)STR555(TriLB) overrulingDaelimscase2006(3)STR124(TriDel.)] CourierServices Theappellant,acourieragencyhadengagedseveralagentsnamedasFranchisees for collection of articles from customers and who collected service charges alongwith service tax from the customers and paid the tax under the category of courierserviceintheirownregistration.Theentireservicechargeswerefullypaid overtotheappellantandappellantsharedafixedamountwiththefranchisees.On these facts, the High Court held that the appellant is not liable to pay any further service tax on the service charges retained after payment to the franchisee under thecategoryoffranchiseservicesince (i) The service tax on the entire amount of charges received from the customers having been paid by the franchisees (agents) under courier services, the net amount cannot again be taxed in the hands of the appellant under Franchisees services since there is no provision in the Finance act, 1994 to tax the very same servicechargestwiceundertwoheads. (ii)Notwithstandingthe(i)above,thenetamountisnotliableunderthecategoryof franchiseservicessince (a)thefranchiseeisactingonlyasanagentoftheappellant; (b) apart from appointing the franchisee the appellant is not providing any servicetothem. (c)thefranchiseesdonotmakeanypaymenttotheappellantunlikeincaseof franchisewhere a franchisorprovides a service tothe franchisee for afee paid by thefranchisee.Infactitisfranchiseewhoarepaidforworkdoneforthefranchisor (theappellant)i.e.actingasanagentforrenderingcourierservicetothecustomers. [SpeedandSafeCourierServicev.Commissioner(2010)18STR550(Ker.)] Erection,CommissioningorInstallationservice Layingthepipesinwall/roofs/floorsforcrossingofwires,fixingthejunctionbox, MS box, Wooden box, fixing the cable trays would not amount to installation or
commissioningofplant,machineryorequipmentandthereforewouldnotbeliable for service tax under Erection, Commissioning or Installation service during the relevantpointoftime.[CCEvsRajeevElectricalsWorks2010(18)STR705(P&H)]. Technicaltestingandanalysis ClinicaltestingofdrugsisnotliableforservicetaxunderthecategoryofTechnical testingandanalysisfortheperiodpriorto1.5.2006since (ii) the testing is in relation to human beings or animals which is specifically excluded;and (iii) The Explanation to section 65(106) inserted w.e.f 1.5.2006 which specifically includedwithinthedefinitionofTechnicalTestingandAnalysis,clinicaltestingof drugsandformulationsbutexcludeddiagnostictestingw.e.f.1.5.2006expandedthe scopeofthedefinitionofTechnicalTestingandAnalysisserviceandhence cannot considered as clarificatory in nature despite the use of the words For the removal of doubts, it is hereby declare that and accordingly the said Explanation wouldnothaveretrospectiveeffecti.e.priorto1.5.2006. [B.A.ResearchIndiaLtd.vs.CST(2010)18STR604(Tri.Ahmd.)] Valuation Photography service is a works contract involving both the elements of sale and serviceandthevalueofsaleportioncannotbeincludedinthevalueofserviceand subjectedtoservicetax.[CCEvs.VahooColourLab(2010)18STR548(P&H.)] Valuation&abatement TheassesseewasengagedinlayingofpipelinesandregisteredunderCommercial orIndustrialconstructionservices.Theassesseeclaimedabatementof67%ofthe gross amount charged under notification 15/2004 dated 10.9.2004 and 1/2006 dated 1.3.2006 and paid service tax on the 33% of the gross amount charged withoutincludingthevalueofpipesprovidedbythecustomerinthegrossamount charged. The Tribunal held that the value of pipes supplied has to be included since (a)thepipelineisessentialcomponentrequiredforprovidingpipelineservicesand istobetreatedasnonmonetaryconsiderationintermsofRule3ofValuationRules; (b) The notification defined the term gross amount charged to include value of goodsandmaterialssuppliedorprovidedorusedbytheprovideroftheconstruction serviceforprovidingsuchservice.Sincepipesare used bytheserviceproviderfor layingpipelines,thevalueofpipeswouldhavetobeincludedinthegrossamount chargedforthepurposeofcomputingtheabatement. [JaihindProjectsLtdvsCST2010(18)STR650(TriAhmd.)] CenvatCredit
Garden maintenance: A garden creates a better atmosphere and environment which increases the working efficiency and hence credit of servicetaxpaidongardenmaintenanceisallowable. Plant House Keeping: Planthousekeepingservicesareessentialandrelated tomanufacturingactivityandaccordinglythecenvatcreditofservicetaxpaid onhousekeepingserviceisadmissible. [BalkrishnaIndustriesLtdvsCCE2010(18)STR600(TriMumbai)] CenvatcreditinrespectofCustomHouseAgentserviceusedforclearanceof imported inputs used in the manufacture of dutiable finished goods is admissible.[NelsunPaperMilsLtd.vsCCE2010(18)STR648(TriChennai)] Penalty u/s 76 & 77 is not attracted for wrong availment of Cenvat credit. Further penalty under rule 15(4) of the credit Rules can be imposed only if Cenvat credit is taken wrongly by reason of fraud, collusion etc., with an intenttoevadepaymentofservicetax.[Sudhakar Polymers Ltd vs CCE 2010 (18)STR635(TriBang.)] Cenvat credit of service tax paid on input services is not conditional upon actual payment of tax/duty by the supplier and can be taken when the assessee has paid for the value and service tax. [Lason India Pvt. Ltd vs CST 2010(18)STR626(TriChennai)]. WheregoodsareexportedonFOB/CIFbasis,Cenvatcreditofservicetaxpaid on outward transportation from factory to port of shipment is admissible. [ModernPetrofilsvsCCE2010(18)STR625(TrAhmd.)]. The assessee, a pharmaceutical company, was held eligible to take Cenvat credit of duty paid on Industrial washing machines used for washing of employeesuniformssincetheyarecapitalgoodsbeing (i) goodsfallingunderchapter84;and (ii) used in the factory of manufacturer to provide clean uniforms to employees which is a mandatory requirement under the Drugs and CosmeticsAct. [CCEvsMicroLabsLtd2010(18)STR771(TriBang.)] Input credit of tax paid on construction services for construction of compoundwallaroundthefactoryisadmissiblesinceonfactsthecompound wallisanintegralpartofthefactory.[CCE vs Raymond Zambaiti Pvt Ltd 2010 (18)STR734(TriMumbai)].
BusinessAuxiliaryServices
Where the appellant, a CHA, arranged containers for their clients who were exporters of goods through steamer agents for a brokerage paid by the steamer agents, the Tribunal held that the brokerage was not taxable under Business Auxiliary Services since the assessees services were in the nature of secondary services which ultimately got consumed with the primary services [presumably steamer agent service] that were exported and by virtue of CBEC Circular No. 56/5/2003dated25/4/2003suchsecondaryservicesareexportsandnottaxable. [RuthShippingAgenciesPvt.Ltd.vs.CCE(2010)19STR39(TriChe.)] CargoHandlingservices Wheretheassesseesarrangedloadingandunloadingofconsignmentsoffertilizers and charged the clients with a 15% margin compared to the amount paid to the contractors it was held that the assessees provided cargo handling services to the client. [Karnataka State Warehousing Corporation Ltd. vs. CCE (2010) 19 STR 32 (TriBang.)] Clearingandforwarding The activity of cutting of sugarcanes and its loading and transportation upto the sugar factories does not amount to clearing and forwarding agent services. [Ajinkyatara Sahakari Krishi Audyogik Otvs Ltd. vs. CCE (2010) 19 STR 285 (Tri Mumbai)] Commercialorindustrialconstructionservice Laying of pipelines for Gujarat Water Supply and Sewerage Board (GWSSB) for supply of drinking water to gram panchayats and nagar panchayats would not be liable under commercial or industrial construction services [which includes constructionofpipelineorconduit]sincethepipelineswerenotlaidtofacilitateany commercialorindustrialactivityofGWSSB.[NagarjunaConstructionCo.Ltd.vs.CCE (2010)19STR259(TriBang.)relyingonIndianHumePipeCo.Ltd.vs.CCE(2008) 12STR363(Tri)] Erection,CommissioningorInstallation Laying of pipelines is not covered under the category of Erection, Commissioning orInstallationserviceandhencenotliableforservicetax[A.Sekarv.CCE(2010) 19 STR 82 (Tri. Chennai) relying on Indian Hume Pipe Co.Ltd. v. CCE (2008) 12 STR363(P&H)] PracticingCharteredAccountantsservices
TransferPricingcertification/reportundersection92EoftheIncometaxAct,1961 would be considered as auditing services and accordingly not entitled for exemption under notification no. 59/98ST dated 16.10.98 (whereby all services except accounting, auditing and certain certification services were exempt).[Price Waterhousevs.CST(2010)19STR63(Tri.Che.)] StorageandWarehousingservices InthiscasetheHighCourtheldthatsubsidyreceivedfromtheGovernmenttowards interest, storage and insurance for maintenance of a specific quantity of free sale sugar for a specified period (buffer stock) under the provisions of Sugar DevelopmentFundAct,1982isnotliableunderthestorageandwarehousekeeping servicesaftermakingthefollowingobservations (i)Nobodycanprovideservicetohimselftheappellantstoredthegoodsownedby himselfforaspecifiedperiodandaftertheexpiryoftheperiodhewasfreetosell thesame; (ii)SubsidyreceivedwasnotonaccountofservicesrenderedtoGovernmentbutis received as compensation on account of loss of interest, cost of insurance etc. incurredonaccountofmaintenanceofstock. (iii) Just because the storage period of free sale sugar had to be extended at the behest of Government of India, neither the sugar mills becomes Storage and WarehouseKeepernortheGovernmentofIndiabecometheirclientinthisregard. [CCEvs.NaharIndustrialEnterprisesLtd.(2010)19STR166(P&H)] TheKarnatakaStateWarehousingCorporation,whoseservicesarerequisitioned by the State Government for storing of essential commodities like fertilizers on payment of a charge, does not perform a statutory function, and is liable for servicetaxunderstorageandwarehousingservices[KarnatakaStateWarehousing CorporationLtd.v.CCE(2010)19STR32(TriBang.)] Touroperatorservices Transportingstaffofclientfromworkplacetotheirresidenceandbackinavehicle would not be liable for service tax under the category of tour operator services sincetheappellantwasneitherengagedintransportingthestaffintouristvehicle nor his activity involved planning, scheduling, organizing, arrangement of tours usinghisvehicle[RemananTravelsvs.CST(2010)19STR83(Tri.Bang.)]. ImportofServices Consulting engineering services rendered by a foreign company to the appellants duringtheperiodNov.98toDecember,2000isnotliableforservicetax,since: (i) Consulting engineering services provided by a body corporate would be liable forservicetaxonlyw.e.f.1.5.2006andnotpriortothatdate;
(ii)inanyeventnoservicetaxwouldbepayableonservicesprovidedfromoutside Indiapriorto18.4.2006sinces.66AoftheFinanceAct,1994wasintroducedonlyw. e.f.18.4.06.AccordinglytheHighCourtheldthattheappellantswouldnotbeliable to pay service tax on the services provided by overseas foreign company. [CCE vs. AracoCorporation(2010)19STR169(Kar.)relyingonCCEvs.SKFIndiaLtd.(2010) 18STR388(Kar.)] Valuation SIM card is not a goods sold to the customer by a mobile service provider but is supplied as part of telecommunication service and it has no intrinsic value other than receiving mobile telephone service from the service provider. Consequently, the value of SIM card is includible in the value of taxable service. [CCE vs. Idea MobileCommunicationsLtd.(2010)19STR18(Ker.)] Where the appellant has already paid VAT on the material component of the construction contract which as per the state VAT law was deemed as 70% and on thebalance30%paidservicetax,theTribunalheldthattheRevenuecannotcollect servicetaxonthematerialcomponentsinceitwouldviolatetheprinciplesoffiscal federalism and mutuality of service tax and sales adopted in the Constitution. [SobhaDevelopersLtd.v.CCE&ST(2010)19STR75(Tri.Bang.)] Demand Where the revenue had raised the demand based on the differences between the amountsshowninST3returnandthebalancesheet,bankbook&ledgerandwhere ithadfailedtoconsidertheexplanationforthedifferencesgivenbytheassesseeat thetimeofinvestigationtheTribunalheldthatthedemandwasnotinaccordance with law and hence not sustainable since the entire demand was based on assumptions and presumptions and the department had failed to establish the demand based on evidence. [CST vs. Purni Ads Pvt. Ltd (2010) 19 STR 242 (Tri Ahmd.)] Limitation Where the assessees were registered under storage and warehousing services as early as 8.3.2004 but did not pay service tax, a show cause notice issued on 21.3.2006fordemandingservicetaxfortheperiod16.8.2002to31.3.2005pursuant toavisitofthedepartmentalofficerson14.2.2005,cannotinvokethelongerperiod of limitation and the demand beyond the normal period of limitation is not sustainable.[KarnatakaStateWarehousingCorporationLtd.vs.CCE(2010)19STR 32(TriBang.)] Wherethedepartmenthadalreadyissuedashowcausenoticeon28.3.2003seeking totaxtheassesseeunderclearingandforwardingservicesfortheperiod199798 to 200001, a second show cause notice dated 9.11.2004 seeking to tax the same
activity under goods transport services is barred by limitation since the department was already aware of the facts. [Ajinkyatara Sahakari Krishi Audyogik OtvsLtd.vs.CCE(2010)19STR285(TriMumbai)] Penalty Where penalty u/s. 78 was not proposed to be imposed in the show cause notice (the foundation stone of the case) the revenue cannot impose the same by exercising the revisionary jurisdiction. Further, where the adjudicating authority imposed a penalty of only Rs. 100/ u/s. 76, the High Court held that the Commissionerinexerciseofhisrevisionaryjurisdictioncannotincreasethepenalty to Rs. 1.5 lakhs since the assessee being a Government Undertaking there was no intention of evasion of tax and the assessee had also explained the reason of non payment and had immediately deposited the tax on being pointed out. [CCE vs. PunjabSmallIndustries&ExportCorpn.Ltd.(2010)19STR16(P&H)] In the present case the appellant has deposited the service tax on the service of renting of immovable property provided by him belatedly. The adjudicating authorityimposedpenaltyu/s76.TheTribunalheldthatthepenaltyu/s.76isnot imposable since the appellant was under a bona fide belief for not depositing the service tax in time and there was no allegation that the tax was collected from service receivers but not paid. [Taradevi Bafna vs. CCE (2010) 19 STr 73 (Tri. Mum)] Where the assessee had paid service tax and interest before the issuance of Show Cause Notice, the Tribunal held that in view of the CBEC Circular No. 137/167/2009CX.4dated3.10.07noshowcausenoticewasrequiredtobeissued. Accordingly no penalties were imposable.[Nischint Engineering Consultants Pvt. Ltd.vs.CCE(2010)19STR276(TriAhmd.)] Refund TheplaceofremovalincasewherethegoodsareexportedonFOBbasiswouldbe the port and accordingly, credit of service tax paid on CHA services in respect of excisable goods at the port area i.e. place of removal would be admissible and accordingly refund of service tax paid on CHA service which is used as input for export of final product would be allowed. [Leela Scottish Lace Pvt. Ltd.. vs. CCE. (2010)19STR69(Tri.Bang.)] Where the assessee paid service tax on auctioneer services, under the category of business auxiliary services even before the introduction of service tax on auctioneeersservicesw.e.f.1.5.2006theTribunalallowedtherefundclaimforthe amount of service tax paid by it under the category of business auxiliary services holding (i)Auctioneerservicesareliableonlyw.e.f.1.5.2006andnotpriortothatdateand hencetheassesseewaseligibleforrefundofsuchtax;
(ii)Section11BoftheCentralExciseAct,1944wouldnotapplytosuchcases,and accordinglythelimitationbarof1yearwouldnotbeapplicable. (iii)Theassesseehadnotcollectedtheservicetaxfromitsclientsevidencedbythe Balance Sheet (amount disclosed as receivables) and Chartered Accountants Certificate.Hencethebarofunjustenrichmentwouldalsonotbeapplicable. [CCEvs.ShankarRamachandraAuctioneers(2010)19STR222(TriMumbai)] Where the appellant paid Rs. 37,960/ as service tax during 200607 but claimed refund of such tax on 21.1.2008 on the ground that the total value of taxable services for the year 2006 07 was below the exemption limit [Rs. 4 lakhs], the Tribunal held that the refund was not permissible since the exemption has to be claimedinadvanceandonceclaimedcannotbewithdrawnforafinancialyear.[L.G. Marwadi vs. CCE (2010) 19 STR 279 (TriMumbai)] Appeals Letter from Commissionerappealable? Pursuant to a clarification sought by the respondentassessee the Addl. CCE vide letter dated 23.12.2004 clarified that service tax was not payable on international doortodoor courier service but the Commissioner vide letter dated 912006 stated that the clarification of the Addl. CCE was not in accordance with a Board Circular and directed the payment of service tax.On appeal, the CESTAT held that theCommissionersletterdated9.1.2006wasanorderbutwasbadinlawsinceit did not give an opportunity to the assessee of being heard / showing cause either under section 73 or section 84. The High Court affirmed the order of the CESTAT. ChiefCommissioner,LTU,Bangalorevs.TNTIndiaPvt.Ltd2010(19)STR5(Kar)] Recoveryofamounts Thedepartmenthasnoauthoritytousecoercivemeasurestocollectanyamountof tax in advance at the time of raid. It can legitimately do so only at the time of recovery proceedings when tax liability has been ascertained by following the procedureofissueofshowcausenoticeandnotbeforethat.Thuswheretheassesee hadtomakeacompulsorypaymenttowardstaxinadvanceatthetimeofraidandin absenceofanyshowcausenoticeissuedbythedepartment,theHonbleHighCourt heldthatthedepartmenthadnorighttodosoandaccordinglyorderedtheamount toberefunded.[NareshKumar&Co.vs.UOI(2010)19STR161(Cal.)] WherethedepartmenthadissuednoticetoONGCu/s.87(b)(i)oftheFinanceAct, 1994,forrecoveryofservicetaxonservicesprovidedbycertainmanpowersupply agencies to ONGC without passing assessment orders crystallising the service tax liabilityofthemanpowersupplyingagenciestheHighCourtheldthat,onlyafteran assessmentorderhasbeenpassedandtheassesseeshavedefaultedinpaymentof assessed tax, the department has powers to issue notice to ONGC u/s. 87 and not beforethat.[O.N.G.C.Ltd.vs.DyCCCEST(2010)19STR164(A.P.)] CENVATcredit
CENVATcreditofservicetaxpaidonconstructionofstaffquartersisallowedonthe ground that staff quarters are premises of the bank and input services include services used in the premises of output service provider [The Lakshmi Vilas Bank Ltd.vs.CCE(2010)19STR40(Tri.Che)] CENVAT credit of service tax paid on repair / maintenance, insurance, surveys, technical inspection certification services and manpower recruitment services all relating to vessels, viz., tugs and barges which were used for the purpose of transporting raw materials and final products from / to ships anchored at sea to/fromtheappellantsfactorywasdisallowedbytheTribunalonthegroundthat noneoftheabovementionedserviceswouldbeconsideredasinputservicessince thequintessentialrequirementsofinputservicelaiddowninthemainpartofthe definition have not been established by the appellant i.e. a nexus between the services in question and manufacture / clearance of excisable goods by the appellant.[VikramIspatvs.CCE(2010)19STR52(Tri.Mumbai)] Rentacab, air travel and servicing of motor vehicle services were considered as activities relating to business and CENVAT credit of service tax paid on those serviceswereallowed[Dr.ReddysLab.Ltd.vs.CCE(2010)19STR71(Tri.Bang.)] (i) CHA Service : The load port would be the place of removal and accordingly, creditofservicetaxpaidonCHAservicesavailedforfacilitatingclearanceofgoods fromtheplaceofremoval(i.e.loadport)wouldbeadmissibleasactivityrelatingto business. (ii)DryCleaningServices:Wearingofcleanuniforms/clothingismandatoryunder Drugs and Cosmetics Act for personnel engaged in the manufacturing of medicaments or drugs. Hence, said services are relating to business and CENVAT creditoftaxpaidonsameisallowed. (iii) Telephone Service : Telephone is used by the appellant for the day to day business operation and hence CENVAT credit of service tax paid on the same is allowed. [CCEvs.Fourrts(I)LaboratoriesPvt.Ltd.(2010)19STR86(Tri.Che.)] CENVAT credit of service tax paid on mediclaim policy, Security services, vehicle insurance,Carrentals,Pestcontrolactivitiesareallowedonthegroundthatthesaid services are all related to the business activity of the appellant. [Hindustan Coca ColaBeveragesP.Ltd.vs.CCE(2010)19STR93(Tri.Bang.)]
Cenvatcreditofservicetaxpaidonoutdoorcateringservicesavailedbythevarious assesseemanufacturersforprovidingcanteenfacilitiestotheiremployeeswould notbeadmissibleforthefollowingreasons: (i)creditofduty/taxinrespectofinputsorinputservicesispermittedonlywhen thesameisusedin,orinrelationtomanufactureofexcisablegoods. (ii)Cenvatcreditwouldnotbeavailablemerelyonthebasisthatthevalueofinput/ inputservicesisincludedinthevalueoffinishedexcisablegoods; (iii)Useoftheinputservicemustbeintegrallyconnectedwiththemanufactureof the final product. The input service must have nexus with the process of manufacture.Ithastobenecessarilyestablishedthattheinputserviceisusedinor in relation to the manufacture of the final product. One of the relevant test to determine the availability of credit would be can the final product emerge without the use of the input service in question? Since Outdoor Catering is not integrally connected with the manufacture of final product it is not an input service. [CCE vs. Sundaram Brake Linings (2010) 19 STR 172 (TriChennai), departingfromCCEv.GTCIndustriesLtd.(2008)12STR468(TriLB)inviewofthe SupremeCourtdecisioninMarutiSuzukiLtd.vs.CCE(2009)240ELT641(SC)] Credit of service tax paid on garden maintenance being an activity relating to businessisadmissible.[RaneTRWSteeringSystemsPvt.Ltd.vs.CCE(2010)19STR 251(TriChennai)relyingonMilliporeIndiaLtd.vs.CCE(2009)13STR616(Tri)] Credit of service tax paid on inspection charges for constructing staff quarters admissible. CreditofservicetaxpaidonMobilePhonesadmissible. [PortOfficer,GujaratMaritimeBoardvs.CCE(2010)19STR282(TriAhmd.) CENVATCreditcannotbedeniedbyquestioningtheassessmentofserviceprovider since it is beyond the jurisdiction of the authorities incharge of the service recipient.[HindustanCocaColaBeveragesPvt.Ltd.vs.CCE(2010)19STR280(Tri Del.)] Where the assessee provided taxable services as well as was engaged in trading activity, and availed CENVAT Credit on input services used for taxable servicesaswellastradingactivity,theTribunalheldthat (i)Tradingactivityisnothingbutpurchaseandsalesandcannotbecalledaservice andthereforeitcannotbeconsideredasexemptedservice. (ii)Rules6(2)and6(3)oftheCENVATCreditRules,2004onlydealwithasituation whereserviceproviderisprovidingtaxableandexemptedservices.Sincetrading activityisnotanexemptedservicerule6cannotbeappliedtosuchasituation.
(iii) The only obvious solution which would be legally correct appears to be to ensurethatonceinquarteroronceinsixmonths,thequantumofinputservicetax credit attributed to trading activity according to standard accounting principles is deductedandthebalanceonlyavailedforthepurposeofpaymentofservicetaxof outputservice.Thispropositionisnotagainstthelawinviewofthefactthatthere areseveraldecisionsofvariousHighCourtsandalsooftheTribunalwhereinaview has been taken that subsequent reversal of credit amounts to nonavailment of credit. [OrionAppliancesLtd.vs.CST(2010)19STR205(TriAhmd.)] AirportService Admission ticket fee collected by the airport authorities from passengers entering theairportisliableforservicetaxunderthecategoryofairportservices.Iftheright tocollectthesaidfeehasbeenlicencedbytheairportauthoritytoanypersonthen thesaidpersonwouldbeliabletopayservicetaxunderthiscategory.[CCEvs.P.C. Paulose(2010)19STR487(Ker.)] N.B. : The Kerala High Court in CCE v.Cochin International Airport Ltd. (2009) 16 STR 401(Ker.) had held that user fee collected from outgoing international passengers was not for a service and hence not taxable. The present decision appearstobecontrarytotheCIALcase. BusinessAuxiliaryServices In this case the Tribunal relying on Board Circular No. 249/1/2006 CX dated 27.10.2008 held that the activity of manufacturing alcohol based perfumes and pharmaceutical products though not liable for Central excise duty amounts to manufacture as defined under s. 2(f) of the Central Excise Act, 1944, and accordingly would not be liable for service tax under the category of business auxiliaryservices.[RubiconFormulationsPvt.Ltdvs.CST(2010)19STR515(Tri Mumbai)] N.B : The above case is prior to the amendment in the definition of Business Auxiliaryservicesfrom7.7.09. Erection,Commissioningorinstallationservice Wheretheappellantwasengagedinfabricationofstructuresatthecustomerssite theTribunalheldthatthisservicewasnotcoveredundererection,commissioning andinstallationservicesinviewofthefollowing: (i)AftersurveyingallBoardCircularsTribunalheld: (a) Structures were not intended to be covered under Plant, Machinery or Equipments.
(b) Erection refers to civil work for installation / commissioning of a plant & machinery. (c)Erection,commissioningorinstallationofstructureswhetherfabricatedornot wasnotcoveredbythedefinitionofErection,CommissioningorInstallationservice priorto152006. Theactivityundertakenbytheappellantisfabricationofstructuresandthiswasnot covered under erection of Plant, Machinery, or Equipments as no civil work was undertaken by the appellant. Accordingly, the process of prefabrication of structures was not covered under the Erection, Commissioning & Installation Servicepriorto152006. (ii)TheactivityundertakenbytheappellantiscoveredunderSection2(f)ofCentral ExciseActasmanufacturingactivity.Hencetheappellantsarenotliabletopaythe servicetaxontheactivitiesundertakenbythem. [NeoStructoConstructionLtd.vs.CCE&C(2010)19STR361(Tri.Ahmd)] ManagementMaintenanceorRepairservices Where the appellants were engaged in erection and commissioning of pre fabricated structures at site and also did maintenance and repair work under variousworkordersatpredeterminedprices,theTribunalheldonfacts,thatthere is no finding/evidence/ observation flowing from the agreement that both parties intendedrepair/maintenanceisaseparatepartandhastobetreatedassuch.Thus, intheabsenceofanymaintenance&repaircontract,thedemandbasedonrateor value contract work is not sustainable prior to 16.6.05. [Neo Structo Construction Ltd.vs.CCE&C(2010)19STR361(Tri.Ahmd)] ManpowerRecruitmentorSupplyAgencyservice Where the entire tenor of the contract was for execution of a lumpsum work of loading, unloading, bagging, stacking, destacking etc. with the customers the Tribunal held that the activity would not fall under the category of Manpower SupplyAgencyservices.[DivyaEnterprisesvs.CCE(2010)19STR370(Tri.Bang.) andS.S.Associatesvs.CCE(2010)19STR438(Tri.Bang.)] InterUnitServicesNotTaxable Where the one unit of corporate entity providing the services to other unit of the samecorporateentitytheTribunalheldthatthedifferentunitsofacorporateentity willnotmakethemseparatelegalentitiesforthepurposeofleviabilityofservicetax and when one renders service to one self service tax is not leviable. [Chemplast SanmarLtd.vs.CCE(2010)19STR424(Tri.Che.)] Valuation
Inrespectofgoodstransportagencyservices,theliabilitytopayservicetaxisfixed onthepayeroffreightandhencetheabatementof75%intermsofNotificationNo. 32/2004 dated 3.12.2004 would be available to such payer of freight. [Andhra PradeshPaperMillsLtd.vs.CCE(2010)19STR557(TriBang.)] Limitation Wheretheappellants,challengedtheconstitutionalvalidityoflevyofservicetaxon touroperators,wasupheldbytheHighCourtvideorderdated30.4.01,taxontour operators became payable 1.4.2000. However , the appellants paid tax only from 1.5.01.OnthefactstheTribunalheldthatashowcausenoticeissuetotheappellant in the year 2005 seeking to levy service tax for the period 1.4.2000 30.4.01 is barredbylimitation.Theextendedperiodoflimitationcannotbeinvokedsincethe factswerealreadyknowntothedepartment.[TravelAidvs.CST(2010)19STR570 (TriChennai)]. Theappellant,ahotel,wasregisteredforservicetaxunderthecategoryofMandap Keeper services and filed its returns regularly from 19972007 but had stopped paying service tax under mandap keeper services from 2002 claiming exemption under notification no. 12/2001 dated 20.12.2001. The department issued a SCN dated 30.1.2007 seeking to reclassify the services under Convention Services to denytheexemptionfortheperiod1.2.200213.7.2004.TheTribunalheldthatthe extended period of limitation cannot be invoked on the ground of suppression of facts since the assessee was regularly filing its returns and the department could haveaskedforfurtherdetailsastheywereawareoftheappellantsactivities.[CCE vs.CasinoHotel(2010)19STR425(Tri.Bang.)]. Penalty Penaltiesu/s.76&78cannotbeimposedsimultaneouslyforthesamedefaultviz, default inpayment of service tax.[CCE vs. City Motors (2010) 19 STR 486 (P& H)]. OncetheprovisionsofSection76standinvokedagainsttheassessee,thepenalties havetobeimposedintermsofthesaidsectionandcannotbeloweredtakingaidof Section 80. Section 80 only empowers the adjudicating authority to set aside the penalties in toto and not lower them. [CCE vs. Bajrangbali Coke Indus. Pvt. Ltd. (2010)19STR567(TriAhmd.)] Where the Commissioner had enhanced the penalty by way of a revisonary order passed u/s. 84 during the pendency of appeal before the Commissioner (Appeals) theTribunalheldthattherevisionaryorderu/s.84wasnotsustainable.[K.T.V.Oil Millsvs.CCE(2010)19STR587(TriChennai)] Where the appellant has voluntarily paid service tax alongwith interest suo motu beforetheissueofshowcausenoticenopenaltyu/s.76isimposable.[VarsanaIspat
Ltd. vs. CCE (2010) 19 STR 359 (Tri. Ahmd); Geotechnical Engg. Research Laboratoryvs.CST(2010)19STR407(TriAhd)] CenvatCredit Cenvatcreditofservicetaxpaidbytheassesseeongoodstransportagencyservices availedbythemfortransportationofemptycylindersfromitsfactorypremisesto the supplier for procuring liquid chlorine, which was an essential input used in manufactureofitsfinalproductisadmissiblebeingserviceusedforprocurementof inputs[KeralaMineralsandMetalsLtd.vs.CCE(2010)19STR505(TriBang.)]. Where the appellant has centralised registration (centralized billing/ centralized accounting system) credit cannot be denied even if invoices of input services are issued in the name and address of its branches especially when the appellant has beendischargingtheentireservicetaxliabilityfromitsregisteredpremisesandhas alsomadethepaymentfromitsregisteredpremisesforthevalueofinputservices receivedbyitsbranchoffices.[ManipalAdvertisingServicesPvt.Ltd.vs.CCE(2010) 19STR506(TriBang.)] Cenvat credit of service tax paid on manpower recruitment services used for maintenance of garden within the factory premises using treated industrial and domestic sewage water, was held to be admissible where it was a statutory requirement under the consent given by the Karnataka State Pollution Control Board(KSPCB).[BrakesIndiaLtd.vs.CCE(2010)19STR524(TriBang.)] WherethegoodsaresoldonF.O.R.basistheTribunalheldthatcreditisadmissible onoutwardtransportationuptothebuyerspremisesbasedonCBECCirculardated 23.08.2007andAmbujaCementsLtd.v.UoI(2009)14STR3(P&H).TheTribunal madethefollowingsignificantobservations (i)Sinceavalueaddedtaxoperatesbytaxinginputgoodsandservicesandoutput goodsandserviceswithprovisionsforcreditoftaxpaidoninputgoodsandservices which can be utilized for payment of tax on output goods services, the present systemoflevyofcentralexcisedutyonmanufacturedgoodsandlevyofservicetax on certain services with facility of credit being available of the central excise duty paidoninputscapitalgoodsandofservicetaxpaidoninputservices,whichcanbe utilizedtowardspaymentofcentralexcisedutyonfinishedgoodsorforpaymentof service tax on output service, has the character of a value added tax. Since basic principle of a value added tax is that while subjecting a finished product to tax, creditoftaxpaidonallinputgoods,capitalgoodsandinputserviceisallowedwhich can be utilized towards payment of tax on the finished product, a corollary to this principlewouldbethatinanindirecttaxofthenatureofvalueaddedtax,whena
finished product is taxed, credit of duty paid on all input goods, capital goods and inputserviceshastobeallowed. (ii)WhentheassessablevalueofthegoodsunderSection4oftheExciseActisnot confined to the manufacturing cost and manufacturing profit but includes all the components like marketing and selling organization expenses, advertisement expenses, after sales service, storages upto time of removal etc. which have contributed to the value of the goods and in case of FOR destination sales at the customerspremises,allexpensesincludingtransportexpensesuptothecustomers premises are includible in the assessable value for charging duty, the input duty credit cannot be confined only to the services used in the completion of manufacturing process. Therefore, while interpreting the scope of input services as defined in Rule 2(l) of Cenvat Credit Rules, 2004, clause (xvia) and (xviaa) of subsection (2) of Section 37 of the Excise Act should not be looked at in isolation anditistheentireCentralExciseActcontainingtheschemeoflevyandcollectionof centralexcisedutywhichhastobetakenintoaccount.Inviewoftheabove,thereis noconflictbetweentheprovisionsofRule2(l)oftheCenvatCredit Rules,2004andclause(xvia)and(xviaa)ofSection37(2)oftheExciseAct. (iii)Creditcannotbedeniedjustbecausethedutyonthegoodshasbeenpaidonthe assessable value determined under Section 4A of the Central Excise Act i.e on the value determined with reference to declared MRP minus abatment instead of transactionvalueundersection4ofCentralExciseAct. (iv)TheappellantssalesareonFORdestinationbasisandthethreeconditionsin this regard mentioned in the Boards Circular dated 23807 are satisfied, that is, ownershipandpropertyinthegoodsremainswiththeappellanttilldeliveryofthe goods in acceptable condition to the customers at their door steps, the appellant bear the risk of loss or damage to goods during transit upto the destination and freight charges are integral part of the price of the goods. [L.G. Electronics (India) Pvt.Ltd.vs.CCE(2010)19STR340(Tri.Del.).SeealsoAutomobileCorporationof GoaLtd.vs.CCE(2010)19STR518(TriMumbai)] Cenvat credit on (i) Vehicle maintenance; (ii) Transportation, installation and maintenance of coolers; (iii) Marketing and publicity services and (iv) Calibration services and Systems maintenance services are allowed on ground that these are activitiesrelatingtothebusinessoftheappellant.[HindustanCocaColaBeverages P.Ltd.vs.CCE&ST(2010)19STR356(Tri.Bang.)] Cenvat Credit of tax paid on shifting of household goods of employees is not allowed since it not in any way connected with the appellants business activity.
[Hindustan Coca Cola Beverages P. Ltd. vs. CCE & ST (2010) 19 STR 356 (Tri. Bang.)]. (i)Marineinlandtransitinsurance:Cenvatcreditofservicetaxpaidoninsuranceof captivepowerplantduringitstransportationwasallowedonthegroundthatsince theinputservicedefinitionspecificallycoversinwardtransportationofinputand capitalgoods,italsocoversinsuranceduringsuchtransportation. (ii)Insuranceformoneyintransit:Cenvatcreditofservicetaxpaidoninsuranceof moneyintransitisallowedbeingactivityrelatingtothebusiness. (iii)Followupservices:Cenvatcreditofservicetaxpaidunderbusinessauxiliary services on followup services for installation of captive power plant is allowed being services in relation to setting up or modernization of factory which are specificallycoveredintheinputservicedefinition. (iv)ResidentialandGuestHouseTelephones:CenvatCreditontelephoneservices in respect of telephone installed at General Managers residence and Guest house are not allowed in absence of evidence that these services are in relation to manufacturingbusiness. (v)AccidentInsuranceofpersonnel:Cenvatcredit ofservicetaxpaidonaccident insuranceonpersonnelworkingintheappellantsfactoryisallowedbeingactivity relating to the business even if they relate to workers supplied by the contractors sinceaspertheprovisionsoftheFactiesAct,theappellantasaprincipalemployer has a vicarious liability for any compensation in the case of injury etc. to even contract workers. [Monnet Ispat & Energy Ltd. vs. CCE (2010) 19 STR 417 (Tri. Del.)] Where the assessee removed inputs as such the Tribunal held that while the assessee on such removal is required to reverse the Cenvat Credit of excise duty availedinrespectofsuchinputs,underrule3(5),thecenvatcreditofservicetaxon GTAservicesavailedforinwardtransportationofsuchinputsneednotbereversed [A.R.Casting(P)Ltdv.CCE2010(19)S.T.R.384(TriDel)] The assessee manufactured & sold rebar coils from their factory and from its BranchSalesOffices(BSOs)andpaidexcisedutyonsuchsales.IthadappointedC&F agentstoreceive,stock&selltheproductsatitsBSOs.Onspecificrequestsfromits customers, in a few cases, the C&F agents did cutting, bending & straightening before selling the goods and charged the assessee certain processing charges. The assessee took credit of the tax paid on such charges. The department denied the credit contending that the process of cutting, bending etc. does not amount to
manufacture and hence the service is not used in relation to manufacture. The Tribunaldismissedthecontentionandheldthatcenvatcreditisallowablesincethe said service is an activity relating to business of the assessee which is an independent limb available to the assessee to claim credit. [Rashtriya Ispat Nigam Ltdv.CCE[2010(19)S.T.R.389(TriBang)relyingonCocaColaIndiaPvt.Ltd.V. CCE(2009)15STR657(Bom.)]. Cenvatcreditofservicetaxpaidonoverseascommissionagentsservicesisallowed on the ground that service of the commission agent is in relation to the business activityoftheappellant.[CCEvs.NilkamalCrates&Bins(2010)19STR431(Tri. Ahmd)]. WorkscontractservicesCompositionscheme Wheretheappellanthadanongoingworkscontractason1.6.07(thedateonwhich servicetaxonworkscontractserviceswereintroduced)buthadpaidservicetax onpaymentsreceivedpriorto1.6.07interaliaunderthecategoryofconstruction services the High Court held that the assessee would not be entitled to avail the benefits of the Composition Scheme [payment of 4% on the gross contract value] sincetheelectiontooptforthecompositionschemeistobemadebeforeservicetax ispaidinrespectoftheworkscontract.[NagarjunaConstructionCompanyLtd.vs. GovernmentofIndia(2010)19STR321(AP)]
EXCISEDUTY
Criticalanalysisofthechangesoramendmentsintherecent past
NOTIFICATIONS Tariff ExemptionfromBasicExciseDutytoballisticgradearamidyarnandballisticgrade aramidfabric[NotificationNo.27/2010C.E.dated4thJune,2010]
Conditionalexemptionisgrantedfromwholeifbasicexcisedutyonmanufacturing ballisticgradearamidyarnandballisticgradearamidfabricmeantformanufacture of bullet proof jackets for supply to the armed forces of the Union or the Police forces of the States or Union territories. Notification no. 64/95 C. E. dated 16th March,1995,hasbeenamendedaccordingly. ExemptionfromEducationCessandSecondaryHigherEducationCesstoCoaland related products: [Notification No. 28/2010 and 29/2010C.E. dated 22nd June, 2010] ExemptionisgrantedfromEducationCessandSecondaryHigherEducationCessto the following goods specified in Tenth Schedule of Finance Act, 2010 w.e.f. 22nd June2010: Sr.No. Goods ChapterHeading 1 2 3 Coal;briquettes,ovoidsandsimilarsolidfuels manufacturedfromcoal Lignite,whetherornotagglomerated,excludingjet Peat(includingpeatlitter),whetherornot agglomerated 2701 2702 2703
Nontariff Export of excisable goods by an undertaking other than a 100% EOU[Notification No.24/2010C.E.(N.T.)dated26thMay,2010] NotificationNo.42/2001C.E.(N.T.)dated26thJune,2001notifiesconditionsand proceduresforexportofexcisablegoodswithoutpaymentofdutyunderRule19(3) of Central Excise Rules, 2002. Now, the said notification has been amended and it doesnotapplytoexportofexcisablegoods,chargeabletonilrateofdutyorwholly exemptedfrompaymentofduty,otherthangoodsclearedbya100%EOU. Dumpers or tippers, registered in the name of service provider in relation to site preparationandclearanceandminingofmineral,oilorgas,tobetreatedascapital goods[Notificationno.25/2010C.E.(N.T.)dated22ndJune,2010] Definition of Capital Goods under Rule 2 (a) of CENVAT Credit Rules, 2004 is amendedtoincludedumpersortippersfallingunderChapter87ofFirstScheduleto CentralExciseTariffAct,1985,registeredinthenameofserviceproviderinrelation tositepreparationandclearanceandminingofmineral,oilorgas.
CleanEnergyCesstobepayableincashonly: TheCleanEnergyCesspayableintroducedbyFinanceAct,2010shallbepayablein cash only as the CENVAT Credit Rules, 2004 have been amended to prohibit utilizationofCENVATCredittopayCleanEnergyCess.[Notificationno.26/2010 C.E.(N.T.)dated29thJune,2010] CIRCULARS: ProcedureforefilingofCentralExciseReturns[(Circularno.201/20/2009CX6 dated28thMay,2010] The following persons are required to file following central excise returns and statements electronically and all the instructions contained in Circular no. 919/09/2010CXdated23rdMarch,2010shallapplytothoseefilings: Person ReturnorStatement RelevantRule Manufacturerwhohas paidCentralExciseDuty ofRs.10Lakhsormore (includingutilizationof CENVATCredit)in previousCENVAT financialyear AnnualFinancialInformation ProvisotoRule12(2)(a) StatementER4 ofCentralExciseRules, 2002 AnnualDeclarationrelatingto SecondprovisotoRule9A principal (1)of inputsER5Monthly CreditRules,2004 Returnofinformationrelating ProvisotoRule9A(3)of toprincipalinputsER6 CENVATCreditRules, 2004 Rule17(3)ofCentral ExciseRules,2002
EOUmanufacturerwho ER2 haspaidCentralExcise DutyofRs.10Lakhsor more(including utilizationofCENVAT Credit)inprevious financialyear
QuarterlyReturns ProvisotoRule9(8)of RegisteredDealer, CENVATCreditRules, irrespectiveofamountof 2004 CENVATCredittakenor passedon inayear Processofpicklingandoilingdoesnotamounttomanufacture [CircularNo.927/17/2010CXdated24thJune,2010]
Theprocessofpicklingandoilingisnothingbutchemicalcleaningofmetals.Asper ASMMetalReferenceBook,Picklingmeansremovingsurfaceoxidesfrommetalsby chemicalorelectrochemicalreaction.Thusprocessofpicklingandoilinginaddition toprocessofdecoiling,cuttingandslittingdoesamounttomanufactureasitdoes notresultinemergenceofanewproduct.Thesameviewhasbeenupheldinsome ofearlierdecisionsofTribunal. NOTIFICATIONS Tariff LevyofCleanEnergyCess: CleanEnergyCess@Rs.50pertonnehasbeenintroducedonrawcoal,rawlignite andrawpeatwitheffectfrom1stJuly,2010.Allothergoodsmentionedhereunder, specifiedinthetenthscheduleofFinanceAct,2010,onwhichCleanEnergyCessis paidatthestageofrawcoal,rawligniteandrawpeatfromwhichthesaidgoodsare produced,areexemptedfromCleanEnergyCess: Sr.No. Goods ChapterHeading 1 2 3 Coal;briquettes,ovoidsandsimilarsolidfuels manufacturedfromcoal Lignite,whetherornotagglomerated,excluding jet Peat(includingpeatlitter),whetherornot agglomerated 2701 2702 2703
Sections5A,6,9,9A,9AA,9C,9D,9E,11,11A,11AA,11AB,11AC,11B,11BB,11C, 11D,11DD,11DDA,12A,12B,12Cand12DofCentralExciseAct,1944andChapters III,VI,VIAandVIBaremadeapplicabletoCleanEnergyCess. Proceduralaspectssuchasregistration,levy,assessment,mannerofpaymentetc.in respect of Clean Energy Cess has been introduced under Clean Energy Cess Rules, 2010 applicable with effect from 1st July, 2010. Clean Energy Cess has been fully exemptedoncoalproducedintheStateofMeghalaya (Notification no. 01/2010, 02/2010, 03/2010, 04/2010, 05/2010, 06/2010 C.E.C. dated22ndJune,2010) Nontariff AmendmentinCENVATCreditRules,2004: Rule6(6)hasbeenamendedandsubclause(iva)suppliedfortheuseofforeign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of notification No. 6/2006 Central Excise dated the 1st March, 2006, number G.S.R.96(E), dated the 1st March, 2006 has been
introduced. Therefore, now the suppliers making supplies to diplomatic missions are not required to reverse proportionate CENVAT Credit relating to exempted goods.(Notificationno.27/2010C.E.(N.T.)dated1stJuly,2010) CIRCULARS: AmendmenttoNotificationNo.42/2001CE(NT): Theboardexaminedthattheexportersofexemptedgoodsorgoodschargeableto NILrateofdutywereexportinggoodsunderbondbyfollowingproceduredescribed inNotificationNo.42/2001CE(NT)dated26thJune,2001andthenwereclaiming refund of CENVAT Credit under Rule 5 of CENVAT Credit Rules, 2004. Board has clarified that such exporters should claim refund of input tax through Notification No. 21/2004 CE (NT) dated 6th September, 2004 where detailed procedure has been described with regard to such refund claims. Therefore, Notification No. 42/2001 CE (NT) has been amended vide Notification No. 24/2010 CE (NT). Accordingly,thegoodswhichareexemptedorchargeabletoNILrateofdutyexcept goods exported by a 100% EOU are disallowed to be exported under Notification No.42/2001CE(NT). (Circularno.928/18/2010CX6dated28thJune,2010) ClassificationofPolyesterStapleFibre BoardhasclarifiedthatpolyesterstaplefibremanufacturedoutofPETscrapand waste bottles are classifiable under Chapter heading 55032000 and not under Chapter39asarticlesofplastic.Itwasobservedthattheprocessofmanufactureis not determinative of the classification of the manufactured product rather the nature of end product and market understanding of said end product is determinativeofclassificationofmanufacturedproduct.polyesterstaplefibreare used as textile articles and therefore, should be classifiable under Section XI. (CircularNo.929/19/2010CXdated29thJune,2010) Toleranceofbreakageofbottlesduetohandingduringstorageandclearance Themanufacturersofbottledbeverageswereclaimingdutyexemptioninrespectof breakageofPETbottlesupto0.5%videBoardsinstructionletterno.ID/3/70CX8 as amended vide letter F. No. 261/ID/1/75CX8 dated 17/09/1975. In certain judicial pronouncements, such benefit was allowed since the said instruction was notbeingrescindedafterintroductionofMODVAT/CENVATscheme. Therefore, board has clarified that if the final product is broken/destroyed then remission can be claimed and if input is written off by assessee as destroyed, the same is required to be dealt with as per the provisions of Rule 3 (5B) of CENVAT CreditRules,2004.Thejudicialpronouncementshavenotconsideredtheprovisions ofMODVAT/CENVATlawsandthereforeareperincuriam. (CircularNo.930/20/2010CXdated9thJuly,2010)
ClassificationofTeafortifiedwithVitamins Theissuebeforeboardwaswhetherteafortifiedwithvitaminsisclassifiableunder chapterheading210120aspreparationofteaorpreparationwiththebasisoftea. Theboardexaminedthesamplesoftheproductandcommercialunderstandingof theproduct.Nosection/chapternotesexcludeteafortifiedwithvitaminsfromthe purviewofChapter21.Therefore,boardhasclarifiedthatteafortifiedwithvitamins isclassifiableunderChapter21. (CircularNo.931/21/2010CXdated15thJuly,2010) LevyofCleanEnergyCess CleanEnergyCesshasbeenintroducedoncoal,ligniteandpeatwitheffectfrom1st July,2010.Followingaretheeminentproceduralaspects: i) Tenth schedule to Finance Act, 2010 prescribed Rs. 100 per tonne rate of duty whichisreducedtoRs.50pertonnevideNotificationNo.3/2010CECdated22nd June,2010. ii)CleanEnergyCessisleviedonimportedcoalincludingwashedcoalbyvirtueof Section3(1)ofCustomsTariffAct. iii)CesshasbeenfullyexemptedoncoalproducedintheStateofMeghalayavide NotificationNo.5/2010CECdated22ndJune,2010. iv)CleanEnergyCesshastobepaidongrossquantityofremovalby5thor6th(in caseofepayment)ofthemonthfollowingthenextmonthtowhichremovalsrelate. Example:thepaymentforremovalsduringthemonthofJuly,2010shouldbepaid by5th/6thSeptember,2010.However,onimportstheCessshouldbepayablewith effectfrom1stJuly,2010. v)EducationCessandHigherEducationCesshasbeenexemptedonsuchproducts videNotificationNo.28/2010CEand29/2010CEdated22ndJune,2010. vi)CertainprovisionsofCentralExciseAct,1944forcollectionandadministration of Cess has been borrowed vide Notification No. 02/2010CEC dated 22nd June, 2010. vii)CleanEnergyCessRules,2010hasbeenintroducedforproceduralaspectssuch asregistration,levy,payments,returns,penaltyetc.videNotificationNo.06/2010 CECdated22ndJune,2010. (F.No.354/72/2010TRUdated24thJune,2010) NOTIFICATIONS
Tariff: Amendment to Notification No. 64/95 CE dated 16th March, 1995: An exemption hasbeenprovidedtogoodssuppliedfordefenseandotherspecifiedpurposesvide Notification No. 64/95 CE dated 16th March, 1995. The said notification has been amended in respect of fuel falling under chapter heading 2710 and now the exemptionisextendedtoanypublicsectoroilcompanyinsteadofonlyIndianOil CorporationLimited. (Notificationno.30/2010CEdated22ndJuly,2010) Amendmenttoconditionsrelatingtogoodssuppliedtomegapowerprojects:Goods suppliedtomegapowerprojects,subjecttocertainconditions,areexemptedfrom basic excise duty and additional duty of excise, vide Notification No. 6/2006 CE dated1stMarch,2006.Theconditionsforsuchexemptionareamendedtoprovide that now an officer not below the rank of Chief engineer in the Central Electricity Authority (earlier Joint Secretary Ministry of Power) may issue certificate with regardtorequirementofgoodsforsettingupofmegapowerproject,indicatingthe quantity,descriptionandspecificationthereof.Further,theundertakingforusageof goods for such mega power project, which was previously asked from the manufacturer, has to be now issued by Chief Executive Officer of the project. (Notificationno.31/2010CEdated28thJuly,2010) CIRCULARS Administrative Control over EOUs in port cities: The administrative control over EOUsinportcitieswaswithconcernedCommissionerofCustoms.However,atall otherplacesacrossIndiatheEOUswerecontrolledbyJurisdictionalCommissioner of Central Excise except Bangalore Customs. Therefore, now with introduction of ACES(AutomationofCentralExciseandServiceTax)andtofacilitateshifttoGSTin shorttime,theboardhasdecidedtohandovertheadministrativecontrolofEOUsto CentralExciseformationsincaseofportcitieslatestby31stJuly,2010 (Circularno.932/22/2010CXdated4thAugust,2010) Valuation of goods cleared in DTA by EOUs: Board has clarified that in case when actual sale transaction takes place from depot, the EOUs, clearing goods to such depots,needtovaluethegoodsintermsofSection14oftheCustomsAct,1962read withCustomsValuationRules(DeterminationofPriceofImportedGoods),2007as followedbyCESTATinvariousjudgmentslikeEndressHauserFlowtec(I)Pvt.Ltd. (2009 (237) ELT 598), Morarjee Brembana Ltd. (2003 (154) ELT 500) and UniworthTextileLtd.(2009(244)ELT401). (CircularNo.933/23/2010CXdated16thAugust,2010)
CASELAWSBasicPreRequisitesforLevyofExciseDuty
1.ChargeofCentralExciseDuty StatutoryProvisionsSection3ofCentralExciseAct,1944(CEA)providesasunder: thereshallbeleviedandcollectedinsuchmannerasmaybeprescribed (a) a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones)whichareproducedormanufacturedinIndiaas,andattherates,setforthin theFirstScheduletotheCentralExciseTariffAct,1985(5of1986) (b)aspecialdutyofexcise,inadditiontothedutyofexcisespecifiedinclause(a) above, on excisable goods (excluding goods produced or manufactured in special economic zones) specified in the Second Schedule to the Central Excise Tariff Act, 1985(5of1986)whichareproducedormanufacturedinIndia,as,andattherates, setforthinthesaidSecondSchedule. Fromtheabove,itisveryclearthat,theBasicPreRequitesforlevyofCentralExcise Dutyareasunder: i)ThereshouldbeproductionormanufactureofgoodsinIndia ii) Such production or manufacture should result in creation of excisable goods,and iii)SuchexcisablegoodsshouldbespecifiedintheScheduletoCentralExciseTariff Act,1985(CETA)forlevyandshouldnotbeexemptedfrompaymentofduty. EachoftheabovePreRequisiteisanalysedindetailedhereafter 2ProductionorManufacture Production a)MeaningTheobservationsoftheCalcuttaHighCourtinAluminiumCorporation of India Ltd. v. Coal Board AIR 1959 Cal. 222 quoted with approval in Empire Industries Ltd. v. Union of India 20 ELT 179, 198 (SC), wherein it was held that Coal was produced and which are considered relevant in the context are given below: The word produce appearing in entry No. 84 is used in juxtaposition with the word manufacture. It would appear to contemplate some expenditure of human skill and labour in bringing the goods concerned into the condition which would attract the duty. It is not required that the goods should be manufactured in the sensethatrawmaterialshouldbeusedtoturnoutsomethingaltogetherdifferent.It wouldstillrequirethattheseshouldbeproducedinthesensethatthesomehuman
activity and energy should be spent on them and these should be subject to some processes in order that these may be brought to the state in which they might becomefitforconsumption. b)ProducingandmanufacturingaresynonymousIthasbeenjudiciallyheldthatto manufacture is to produce something new out of the existing materials. Manufacture and the adjective manufacturing are synonymous and inter changeablewithproduceandproducing.Toproduceistomakeormanufacture, tobringintobeingorformmanufactureorproducethusimplieschangeinthesense of transformation into new and different article having a distinct name, character anduse[Chirukandanv.SCE15ELT7,11,12(Ker.);SeealsoPulpallyDevaswam v.StateofKerala1977Ker.LT549.] c)CITv.N.C.Budharaja&Co.204ITR412(SC)InthesaidcasetheSupremeCourt observed that: the word production has a wider connotation than the word manufacture.Whileeverymanufacturecanbecharacterizedasproduction,every production need not amount to manufacture. The Supreme Court also observed that: d)ManufactureProductionTheconceptofmanufactureunderCentralExciseisof verywideconnotation.Theconceptofproductioncouldbewiderinconnotation as compared to manufacture in the sense that it could cover within its ambit excisablegoodswhichareproduced(e.g.Coal,Oresetc.)ratherthanmanufactured in the strict sense by using raw material etc. Credit is allowable not only to a manufactureroffinalproducts,butalsotoaproducerofsuchgoods.Whiletheword manufacturehasbeengivenaninclusivedefinitioninSection2(f)ofCEAtheword produce has not been given a specific definition. However, under Section of CEA excisedutyistobeleviedandcollectedonallexcisablegoodswhichareproduced ormanufacturedinIndia. Manufacture Section2(f)oftheCEAdefinesmanufactureasfollows: manufactureincludesanyprocess, (i)incidentalorancillarytothecompletionofamanufacturedproduct;and (ii)whichisspecifiedinrelationtoanygoodsintheSectionorChapternotesofthe First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or Thus the statutory definition would indicate that manufacture underCentralExcisehastobeconstruedthrougha3TIERProcess: >>GeneralConceptofmanufacture >>DeemedConceptofmanufacture
>>MRPConceptofmanufacture a)ManufactureGeneralConceptTheGeneralConceptofManufacturehasbeena subjectmatter of discussion in a number of cases by the Supreme Court in the contextofCentralExciseaswellasSalesTax.Someoftheleadingcaselawsonthe subject which have laid down principles as to what constitutes manufacture are givenbelowforreference: >>UOIvs.DelhiClothandGeneralMillsCo.Ltd.1ELTJ199(SC) >>SouthBiharSugarMillsLtd.vs.UOI2ELTJ336(SC) >>EmpireIndustriesLtd.vs.UOI20ELT179(SC) >>Chowgule&Co.Pvt.Ltd.vs.UOI47STC124(SC) >>Dy.CommercialSalesTaxOfficervs.PioFoodPackers6ELT343(SC) >>SterlingFoodsvs.StateofKarnataka26ELT3(SC) >>Dy.CSTvs.ShiphyInternational34ELT416(SC) >>RajasthanStateChemicalsWorksvs.CCE55ELT444(SC) >>SiddeshwariCottonMillsP.Ltd.vs.UOI39ELT498(SC) >>MafatlalFineSpg.&Mfg.Co.Ltd.vs.CCE40ELT218(SC) >>MotiLaminatesPvt.Ltdvs.CCE76ELT241(SC) >>UOIvs.DelhiCloth&GeneralMillsCo.Ltd.92ELT315(SC) The important principles relating to manufacture as laid down in the various SupremeCourtcasesaswellasotherjudicialcasesissummarizedbelow,inorderto ascertain as to whether any activity / or any activity relating thereto constitutes Manufactureornot: i)Processwouldimplytosubjecttosomespecialprocessortreatment,tosubject (especiallyrawmaterial)toaprocessofmanufacturedevelopmentorpreparation forthemarket,etc.,toconvertintomarketableform. ii) Wherever a commodity undergoes a change as a result of some operation performedonitorinregardtoit,suchoperationwouldamounttoprocessingofthe commodity.Thenatureandextentofthechangeisnotmaterial. iii)Thenatureandextentofprocessingmayvaryfromcasetocase. iv) The test is whether in the eyes of those dealing in the commodity or in commercialparlance,theprocessedcommodityisregardedasdistinctinchar v)alteridentityfromtheoriginalcommodity. vi)Theremaybeseveralstagesofprocessing,adifferentkindofprocessingateach stage.Witheachprocesssuffered,theoriginalcommodityexperiencesachange.
vii) Process of manufacture or in relation to manufacture implies not only the productionbutthevariousstagesthroughwhichtherawmaterialsissubjectedto changebydifferentoperations. viii)Itisonlywhenthechangeorseriesofchangestakethecommoditytothepoint where commercially it can no longer be regarded as the original commodity, but insteadisrecognisedasanewanddistinctivearticle,thatamanufacturecanbesaid totakeplace. ix) The word manufacture used as a verb is generally understood to mean as bringingintoexistenceanewsubstanceanddoesnotmeanmerelytoproducesome changeinsubstance,however,minorinconsequencethechangemaybe. x) The word manufacture implies a change but every change in the raw material wasnotmanufacture,andyeteverychangeinanarticleistheresultoftreatment, labour and manipulation. But something more is necessary and there must be transformation; a new and all different article must emerge, having a distinctive name,character,oruse. xi)Itisnotnecessarythattheshouldabsolutelymakeoutanewthinguntilitisthe transformationofamatterintosomethingelseandthatsomethingelseisaquestion ofdegreewhetherthatsomethingelseisadifferentcommercialcommodityhaving distinctcharacter,useandnameandiscommerciallyknownassuch. xii) If the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. xiii)Itisthecumulativeeffectofthevariousprocessestowhichtherawmaterialis subjected to, manufactured product emerges. Therefore, each step towards such productionwouldbeaprocessinrelationtothemanufacture.Whereanyparticular processissointegrallyconnectedwiththeultimateproductionofgoodsthatbutfor that process, manufacture or processing of goods would be impossible or commerciallyinexpedient,thatprocessisoneinrelationtothemanufacture. xiv)Thecharacteristicsofthenewproductmustbedistinctfromtherawmaterial fromwhichithasbeenmade.xv)Itisnecessarytofindoutwhetherthesearegoods, that is to say, articles as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the schedule.
xvi)Ifnolastingchangeisbroughtabout,itmaynotconstitutemanufacture. xvii)Thedutyofexcisebeingonproductionormanufacturewhichmeansbringing out a new commodity it is implicit that such goods must be useable, movable, saleableandmarketable. b) Deemed Concept of Manufacture In addition to the General Concept of Manufacture there is a deeming fiction under Section 2(b) of CEA, which provides that if an activity, in relation to specified Chapter headings/Chapter of CETA, is specifiedintherelevantChapterNotes/SectionNotesofCETA,thensuchactivity wouldamounttomanufactureandwouldattractlevyofexciseduty.Toillustrate: Anactivityofrepackingfromabulkpacktosmallerpackwouldusuallynotamount tomanufactureunderthegeneralconcept.Howeverifsuchanactivityisspecified under a Chapter Note in relation to specified Chapter / Chapter headings of CETA then such activity would be deemed to be manufacture and attract levy of Central exciseduty,irrespectiveoftheprinciplesrelatingtomanufacture. c)MRPConceptofManufactureInregardto(about98productsspecifiedinThird Schedule to CETA) which are under MRP based levy, the concept of manufacture, hasbeenextendedtocoveractivitiesofpacking,repacking,labellingetc. ExcisableGoods AccordingtoSection2(d)ofCEA: ExcisablegoodsmeansgoodsspecifiedintheScheduletotheCentralExciseTariff Act,1985(5of1986)asbeingsubjecttoadutyofexciseandincludessalt. Central excise law does not define goods. However, meaning of goods has been consideredbytheSupremeCourtfromtimetotime.Accordingly: >>Anarticlecanbecalledgoodsifitisknowntothemarketassuchandcan ordinarilycometothemarketforbeingboughtandsold. >>Actualsaleofthearticleisnotimportantbutitmustbecapableofbeingbought andsold. >>Thetermgoodscannotincludeimmovableproperty.Moveablepropertyunder theGeneralClausesActmeans: propertyofeverydescriptionexceptimmovableproperty. InthecontextofPlant&Machineryinstalledatsite,whetherthesameconstitutes goods or not so as to attract excise duty, has been a subject of extensive judicial
considerations.Inthisregard,relevantextractsfromCBECOrderNo.58/1/2002 CXdt.15.1.02,arereproducedhereafterforreference Plant&MachineryassembledatsiteCBECclarifications Para3 AnumberofApexCourtjudgmentshavebeendeliveredonthisissueintherecent past.Someoftheimportantonesarementionedbelow: (i)QualitySteelTubesPvt.Ltd.v.CCE(1995)75ELT17(SC) (ii)MittalEngineeringWorksPvt.Ltd.vCCE,Meerut(1996)88ELT622(SC) (iii)SirpurPaperMillsLimitedvCCE,Hyderabad(1998)97ELT3(SC) (iv) Silica Metallurgical Ltd. v. CCE, Cochin (1999) 106 ELT 439 (Tribunal) [ConfirmedbytheSupremeCourtvideorderdt.22.2.99[1999(108)ELTA58(SC)] (v)DuncanIndustriesLtdv.CCE,Mumbai(2000)88ECR19(SC) (vi)TriveniEngineering&IndustriesLtd.v.CCE,Mumbai(2000)120ELT273(SC) (vii)CCE,Jaipurv.ManStructuralLtd.v.CCE(2001)130ELT401(SC)] Para4 The plethora of such judgments appear to hae created some confusion with the assessingofficers.ThematterhasbeenexaminedbytheBoardinconsultationwith theSolicitorGeneralofIndiaandthematterisclarifiedasunder: (i) For goodsmanufacturedatsitetobedutiabletheyshouldhaveanewidentity, character and use, distinct from the inputs / components that have gone into its production.Further,suchresultantgoodsshouldbespecifiedintheCentralExcise Tariff as excisable goods besides being marketable i.e. they can be taken to the market and sold (even if they are not actually sold). The goods should not be immovable. (ii)Whereprocessingofinputsresultsinanewproductwithadistinctcommercial name,identityanduse(priortosuchproductbeingassimilatedinastructurewhich would render them as a part of immovable property), excise duty would be
chargeable on such goods immediately upon their change of identity and prior to theirassimilationinthestructureorotherimmovableproperty. (iii)Wherechangeofidentitytakesplaceinthecourseofconstructionorerectionof astructurewhichisanimmovableproperty,thentherewouldbenomanufactureof goodsinvolvedandnolevyofexciseduty. (iv) Integrated plants / machines, as a whole, may or may not be goods. For example,plantsfortransportationofmaterial(suchashandlingplants)areactually asystemoranetworkofmachines.Thesystemcomesintobeinguponassembly ofitscomponent.Insuchasituationthereisnomanufactureofgoodsasitisonly acaseofassemblyofmanufacturedgoodsintoasystem.Thiscannotbecompared to a fabrication where a group of machines themselves may be combined to constituteanewmachinewhichhasitsownidentity/marketabilityandisdutiable (e.g. a papermakingmachineassembledatsiteandfixedtotheearthonlyforthe purposefoensuringvibrationfreemovement) (v)Ifitemsassembledorerectedatsiteandattachedbyfoundationtoearthcannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore,notbeexcisablegoods. (vi) If any goods installed at site (example paper making machine) are capable of beingsoldorshiftedassuchafterremovalfromthebaseandwithoutdismantling intoitscomponents/parts,thegoodswouldbeconsideredtobemoveableandthus excisable. The mere fact that the goods, though being capable of being sold or shiftedwithoutdismantling,areactuallydismantledintotheircomponents/parts foreaseoftransportationetc,theywillnotceasetobedutiablemerelybecausethey aretransportedindismantledcondition.Rule2(a)ofRulesfortheInterpretationof Central Excise Tariff will be attracted as the guiding factor is capability of being marketedintheoriginalfromandnotwhetheritisactuallydismantledornot,into its components. Each case will therefore have to be decided keeping in view the factsandcircumstances,particularlywhetheritispracticallypossible(considering the size and nature of the goods, the existence of appropriate transport by air, water,landforsuchsize,capabilityofgoodstomoveonselfpropulsionshipsetc.) to remove and sell the goods as they are, without dismantling into their components.Ifthegoodsareincapableofbeingsold,shiftedandmarketedwithout first being dismantled into component parts, the goods would be considered as immovableandthereforenotexcisabletoduty. (vii) When the final product is considered as immovable and hence not excisable goods,thesameproductinCKDorunassembledformwillalsonotbedutiableasa
whole by applying Rule 2(a) of the Rules of Interpretation of the Central Excise Tariff. However, components, inputs and parts which are specified excisable products will remain dutiable as such identifiable goods at the time of their clearancefromthefactoryorwarehouse. (viii) The intention of the party is also a factor to be taken into consideration to ascertainwhethertheembedmentofamachineryintheearthwastobetemporary or permanent. This, in case of doubt, may help determine whether the goods are moveableorimmovable.Excitability Itispossiblethatinagivencaseanactivitymayamounttomanufacture&result increationofexcisablegoods.Howevertheremaybenopaymentofexciseduty duetovariousreasonsToillustrate: >> Activityofconversionofmetaltoornamentresultsincreationofexcisablegoods. HoweverunderCETAthereNILdutyisspecified.(egJewellery) >> Concerned Manufacturer is operating under SSI Exemption Scheme [NIL duty upto150lakhsclearances.] >> Activity is exempted from excise duty under Specific Job Work Exemption Notification. Hence, satisfaction of exemption test (general or specific), would be essential to determineexcisabilityofaproduct.
CASELAWS
A.Benefitofexemptionundernotification6/2000CEisavailableforsupplytothe existingWatertreatmentplant(WTP)also. Lanco Industries Ltd. V/s Commissioner of Central Excise, Tirupathi 2010 (253) E.L.T.70(Tri.Bang.)
Thetribunalhasheldthatpipesusedintheexistingtreatmentplantorexpansion uptothestoragefacilitiesandfThetribunalhasheldthatpipesusedintheexisting treatmentplantorexpansionuptothestoragefacilitiesandfromitssourceforthe delivery of water to WTP is eligible for exemption under notification No. 6/2002 C.E. The tribunalhas held thatthe appellant produced requisite certificates by the DistrictCollectorwhereintheplantislocatedwhichistheonlyconditionprescribed to avail benefit of notification. Further the CBEC clarification vide letter F. No. 354/34/2008TRU dated 1432008 that exemption under notification applied to piped supplied for replacement of worn out/ damaged pipes had retrospective effectandsupportedtheappellant. B. Section 51 of the SEZ Act, 2005 overriding effects: Goods to be treated as re exportonremovaltoSEZfromDTA B.J.ServicesCo.MiddleEastLtd.V/sCommissionerofCustoms,Mumbai2010(253) E.L.T.335(Tri.Mumbai) TheappellantimportedOilWellequipmentsandclaimedthebenefitofnotification no.21/2002,Sr.No.217.Thegoodswereoldandusedequipmentsandimportwas allowedintermsofpara2.21oftheEXIMpolicy20022007subjecttothecondition that the goods shall be exported. The appellant sold the goods to SEZ, Vishakapattam.ThemainquestiontobedealtwasthatwhethersaletotheSEZisto beconsideredasexporttofulfilltheconditionofexportunderpara2.21oftheEXIM policy20022007. Thetribunalhasheldthatinviewofthesection51oftheSEZAct,2005whereinitis provided that the provision of the SEZ Act would have overriding effect notwithstandinganythinginconsistentcontainedinanyotherActandinviewofthe definitionofimportunderSEZAct,whichprovidesthatreceiptofanygoodstoSEZ fromDTAwouldamounttoexportfromDTA,bythesaidexporttheirobligationhas beenprimafaciefulfilled.

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MVAT

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

Consentletterfromowneroftheplace. Proofofownershipofthelandlordofplaceofbusiness[asper above(a)]

e PANCardofDirectors. f AddressProofofDirectors. g NotarisedphotocopyofPassportofManagingDirector.

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

ConstructionofComplexbybuilder 75 orauthorizedperson(zzzh) TransportofGoodsbyRail(zzzp) 70

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

extractionorproductionofmineral,oil andnaturalgasandsupplythereof. Anyserviceprovidedortobeprovided by or to such installations, structures andvesselsandforsupplyofanygoods connectedwiththesaidactivity.

Service provider centric

Service receiver / customer centric

EZINE August, September 2010

Service provider centric

Service receiver / customer centric

Could be both ? Place of Supply Rules required

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

S.No 44. 45. 46. 47. 48. 49.

71. 72. 73.

EZINE August, September 2010

EffectiveDate 16.06.05 16.06.05 16.06.05 16.06.05 16.06.05 01.05.06 01.05.06 01.05.06

92. 93. 94. 95. 96. 97. 98. 99.

100. 101. 102.

EZINE August, September 2010

Conclusion TheabovetopicServicetaxIncidenceandLevy isatopicwhichisheavy forthebusinessitismessy fortheconsumersthingsbecomepricey forthegovernmentitisjuicey butfortheprofessionalsitisdicey andsometimestheexperienceisspicey!

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EOUmanufacturerwho ER2 haspaidCentralExcise DutyofRs.10Lakhsor more(including utilizationofCENVAT Credit)inprevious financialyear

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

EZINE August, September 2010

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