Friday, February 27, 2015


Economic Survey 2014-15 Highlights 

Economic Outlook, Prospects and Policy Challenges

  • · Macroeconomic fundamentals in 2014-15 have dramatically improved. Highlights are:
  • · Inflation has declined by over 6 percentage points since late 2013.
  • · The current account deficit has declined from a peak of 6.7 percent of GDP (in Q3, 2012-13) to an estimated 1.0 percent in the coming fiscal year.
  • · Foreign portfolio flows have stabilized the rupee, exerting downward pressure on long-term interest rates, reflected in yields on 10-year government securities, and contributed to the surge in equity prices.
  • · In response to the favourable terms of trade shock (especially with regard to oil), macroeconomic policy has appropriately balanced government savings (two-thirds) and private consumption (one-third).
  • · After a nearly 12-quarter phase of deceleration, real GDP has been growing at 7.2 percent on average since 2013-14, based on the new growth estimates of the Central Statistics Office. Notwithstanding the new estimates, the balance of evidence suggests that India is a recovering, but not yet a surging, economy.
  • · From a cross-country perspective, a Rational Investor Ratings Index (RIRI) which combines indicators of macro-stability with growth, illustrates that India ranks amongst the most attractive investment destinations. It ranks well above the mean for its investment grade category (BBB), and also above the mean for the investment category above it (on the basis of the new growth estimates).
  • · Several reforms have been undertaken and more are on the anvil. The introduction of the GST and expanding direct benefit transfers can be game-changers.
  • · Structural shifts in the inflationary process are underway due to lower oil prices, deceleration in agriculture prices and wages, and dramatically improved household inflation expectations. Going forward inflation is likely to remain in the 5-5.5 percent range, creating space for easing of monetary conditions.
  • · In the short run, growth will receive a boost from the cumulative impact of reforms, lower oil prices, likely monetary policy easing facilitated by lower inflation and improved inflationary expectations, and forecasts of a normal monsoon in 2015-16. Using the new estimate for 2014-15 as the base, GDP growth at constant market prices is expected to accelerate to between 8.1 and 8.5 percent in 2015-16.
  • · Medium-term prospects will be conditioned by the “balance sheet syndrome with Indian characteristics” that has the potential to hold back rapid increases in private sector investment. Private investment must be the engine of long-run growth. However,there is a case for reviving targeted public investment as an engine of growth in the short run to complement and crowd-in private investment.
  • · India can balance the short-term imperative of boosting public investment to revitalize growth with the need to maintain fiscal discipline. Expenditure control, and expenditure switching from consumption to investment,will be key.
  • · The outlook is favourable for the current account deficit and its financing. A likely surfeit, rather than scarcity, of foreign capital will complicate exchange rate management. Reconciling the benefits of these flows with their impact on exports and the current account remains an important challenge going forward.
  • · India faces an export challenge, reflected in the fact that the share of manufacturing and services exports in GDP has stagnated in the last five years. The external trading environment is less benign in two ways: partner country growth and their absorption of Indian exports has slowed, and mega-regional trade agreements being negotiated by the major trading nations in Asia and Europe threaten to exclude India and place its exports at a competitive disadvantage.
  • · India is increasingly young, middle-class, and aspirational but remains stubbornly male. Several indicators suggest that gender inequality is persistent and high. In the short run, the renewed emphasis on family planning targets,backed by misaligned incentives, is undermining the health and reproductive autonomy of women.

E Books on Service Tax and Vat by ICAI indirect Tax committee Free download

The Indirect Taxes Committee of ICAI has taken an initiative to develop state wise technical guides on VAT as well as sector specific technical guides/ background material on Service Tax to facilitate a handy learning experience to the members. It gives me immense pleasure to introduce you that the following new publications have been launched by the Indirect Taxes Committee.

Service Tax not applicable on goods billed separately used in repairing Services

Service Tax cannot be levied on consideration received for supply of goods and even handling charges incurred in connection with the procurement of the parts to be sold further or to be used for repairing/ servicing of vehicles are not includible for payment of Service Tax as sales tax/VAT liability is discharged on the value inclusive of handling charges.

The decision has been taken 


In the matter of 


Crux of the Decision: 

Service tax is not leviable on a transaction treated as a sale of goods means when spare parts are sold by a service station during the servicing of vehicles. Even otherwise, what is liable to service tax is only the consideration received for servicing of the vehicles and not the consideration received for sale of parts or equipments.

Issue Involved:

"Whether the handling charges collected by the client, as part of the value of the goods when a composite activity of sale as well as services are involved, are liable to Service tax ?

Decision of the Bench :

We notice that the appellant are charging handling charges whenever automobile parts are sold either independently or part of the service and repair of automobiles. In both the situations, invoices are issued for the sale of the goods as well as for collection of service charges for the services rendered. Handling charges were incurred in connection with the procurement of the goods and are included in the value of the goods sold and sales tax/VAT liability is discharged on the value inclusive of the handling charges. Therefore, we do not understand how service tax levy would apply especially when the goods are subject to sales tax/VAT on a value inclusive of handling charges. It is not in dispute that the handling charges are incurred in connection with the procurement of the parts. If that be so they will obviously form part of the value of the goods when they are subsequently sold.


On the basis of above judgment it can be concluded that it is not in dispute that the handling charges were incurred in connection with the procurement of the parts and that is why this forms the part of the value of the goods when they are subsequently sold and hence will subject to VAT/Sales Tax and not to the Service Tax. The main things to be noted is that the handling charges incurred related to the transaction of Sale and not to the transaction of Service like repair/ service activity. On this basis also the expenditure related to the transaction of sale will be subjected to VAT/Sales tax and not to the Service Tax

Arun Sharma
Hari Global Advisory Services Pvt Ltd.
(Attorneys & Advisors for Service Tax, Central Excise & Custom , IPR).
L:01141051727 Ph. No.- 9953757893/9999036150.

Pre-deposit has to be waived off if Assessee’s case is a good/ strong prima facie case covered by a binding precedent

We are sharing with you an important judgment of Hon’ble High Court, Allahabad, in the case of Shukla & Brothers Vs. Customs, Excise & Service Tax Appellate Tribunal [(2015) 54 182(Allahabad)]on the following issue:
Whether it is possible to waive off the Pre-deposit,when Assessee’s case is a good/ strong prima facie case covered by a binding precedent?
Facts & background:
Shukla & Brothers (“the Appellant”) is a proprietorship firm registered under Service tax under the category of 'Construction Work'. However, under some confusion and misguidance, the Appellant was issued registration under ST-2 in the category of 'Civil Structure Construction Work'. The Appellant claimed that the services provided are of maintenance/ sanitation services provided at factory premises of clients, which does not fall within the Service tax net.

Thursday, February 26, 2015


 Highlights of the Railway Budget 2015-16

  • No hike in Railway Passenger Fares 
  • No new train introduced in rail Budget
  • Change in commodity class ,impact upto 10 % freight increase on few commodities Hike in coal freight 6.3%,Urea 10% Cement :2.7% ,Steel :1% Freight rate on HSD reduced by 1%.
  • Plan Outlay proposed Rs. 1,00,011 crore, increased by 52% 
  • Allocation for passenger amenities up by 67% 
  • Railways to become prime mover of Indian Economy, Five years action plan proposed
  • Rail Budget seeks resource mobilization for higher investment
  • Thrust on measurable and sustainable improvement in passenger experience and to make Rail a safer means of travel
  • Hot buttons, coin vending machines for railway tickets within 5 minutes, e-catering to select meals from an array of choices
  • 200 more stations to come under Adarsh Station scheme; 
  • Wi - Fi to be provided at B category stations
  • 24X7 helplines for attending passenger problems and security related complaints
  • For the safety of women passengers surveillance cameras in suburban coaches
  • More General class coaches will be added in identified trains.
  • The speed of nine railway corridors will be increased to 160 and 200 kmph
  • Train Protection Warning System and Train Collision Avoidance System to be installed on select routes
  • 77 new projects covering 9,400 km of doubling/tripling/quadrupling works proposed
  • A new department for keeping stations and trains clean under Swachh Rail Swachh Bharat Abhiyan

  1. IR to become prime mover of economy once again 
  2. Resource Mobilization for higher Investments 
  3. Decongestion of heavy haul routes and speeding up of trains: emphasis on gauge conversion, doubling, tripling and electrification 
  4. Project delivery 
  5. Passenger Amenities. 
  6. Safety 
  7. Transparency & System Improvement. 
  8. Railways to continue to be the preferred mode of transport for the masses. 
  9. Sustainability. 

Four goals for Indian Railways to transform over next five years: 
a) To deliver a sustained and measurable improvement in customer experience. 

b) To make Rail a safer means of travel. 

c) To expand Bhartiya Rail’s capacity substantially and modernise infrastructure.: increase daily passenger carrying capacity from 21million to 30 million: increase track length by 20% from 1,14,000 km to 1,38,000 km: grow our annual freight carrying capacity from 1 billion to 1.5 billion tonnes. 

d) Finally, to make Bhartiya Rail financially self-sustainable. Generate large surpluses from operations not only to service the debt needed to fund our capacity expansion, but also to invest on an on-going basis to replace our depreciating assets. 

Execution strategy to have five drivers: 

a) Adopting a medium-term perspective: Railway Budget part of trilogy of documents viz. the White Paper placed today, Budget 2015-16 & a Vision-2030 document which will follow. Budget proposals to mark beginning of a Five Year Action Plan to transform the Railways. 

PROPOSED INVESTMENT PLAN (2015-2019) Item Amount (Rs in crore) 

Network Decongestion (including DFC, Electrification, Doubling including electrification and traffic facilities) 199320 Network Expansion (including electrification) 193000 
National Projects (North Eastern & Kashmir connectivity projects) 39000 
Safety (Track renewal, bridge works, ROB, RUB and Signalling & Telecom) 127000 
Information Technology / Research 5000 Rolling Stock (Locomotives, coaches, wagons – production & maintenance) 102000 
Passenger Amenities 12500 
High Speed Rail & Elevated corridor 65000 
Station redevelopment and logistic parks 100000 
Others 13200 
TOTAL 8,56,020

b) Building Partnerships: This will require partnering with key stakeholders: States, PSU’s, partner  with multilateral and bi-lateral organizations & other governments to gain access to long term financing and technology from overseas, the private sector to improve last mile connectivity, expand fleet of rolling stock and modernize our station infrastructure. 

c) Leveraging additional resources: IR envisages investment of Rs. 8.5 lakh crore in next five years to be mobilized from multiple sources to cater to funding i.e Multilateral development banks, pension funds. 

d) Revamping management practices, systems, processes, and re-tooling of human resources:  Targeted operating ratio for 2015-16 at 88.5% against 91.8%in 2014-15: best in the last 9 years.  IR to speed up decision making, tighten accountability, improve management information systems: training and development of human resource. 

e) To set standards for Governance and Transparency 

Eleven major thrust areas of Action Plan: Quality of life in journeys: 

Cleanliness:-Swachh Rail Swachh Bharat, new department for cleanliness, integrated cleaning by engaging professional agencies and training our staff, ‘waste to energy’ conversion plants, new toilets covering 650 additional stations compared to 120 stations last year. Bio-toilets. 

Bed linen: NIFT to design; online booking of disposable bed rolls: 

Help-line: 24X7 helpline number 138;toll-free number 182 for security related complaints. 

Ticketing: operation five minutes for issuing unreserved tickets, hot buttons, coin vending machines, single destination teller, concessional e-tickets for differently abled travelers, developing a multi-lingual e-portal, crediting of refunds through banks, unreserved tickets on Smart phones, proliferation of automatic ticket vending machines with smart cards and currency options, integrated ticketing system on the lines of rail-cum-road tickets, Defence Travel System developed for elimination of Warrants . 

Catering: e-catering to select meals from an array of choices. Ordering food through IRCTC website at the time of booking of tickets; integrating best food chains into this project; setting up of Base Kitchens in specified Divisions to be run by reputed agencies for serving quality food; expansion of water vending machines. 

Leveraging technology: Hand-held terminals to Travelling Ticket Examiners (TTEs) for verification of passengers and downloading charts; possibility of extending facility of SMS on mobiles as a valid proof of travel for PRS tickets; integrated customer portal as a single interface to access different services; Introduction of a centrally managed Railway Display Network in over 2000 stations in next two years; “SMS Alert” service to inform passengers in advance of the updated arrival/departure time of trains at starting or destination stations. 

Surveillance: surveillance cameras provided on a pilot basis in selected mainline coaches and ladies’ compartments of suburban coaches without intruding into privacy. 

Entertainment: project for introducing on-board entertainment on select Shatabdi trains on license fee basis launched; Mobile phone charging facilities to be provided in general class coaches & increased in sleeper class coaches.Page 3 of 8 

Station facilities: 200 more stations to come under Adarsh Station scheme; Wi - Fi to be provided at B category stations ; facility of self-operated lockers to be made available at stations; provision of concierge services through IRCTC at major stations; online booking of wheel chair on payment basis for senior citizens, patients and the differently-abled passengers through IRCTC on select stations. 

Train capacity: capacity in identified trains be augmented to run with 26 coaches; more General class coaches be added in identified trains;
Comfortable travel: NID approached to design user friendly ladders for climbing upper berths; increasing quota of lower berths for senior citizens; TTEs be instructed to help senior citizens, pregnant women and differently-abled persons in obtaining lower berths; middle bay of coaches to be reserved for women and senior citizen; NID to develop ergonomically designed seats; introduction of train sets; Provision of Rs. 120 crore for Lifts and escalator which is 76% higher; newly manufactured coaches will be Braille enabled; building wider entrances for the ease of differently-abled passengers; allocation for passenger amenities up by 67% Y-O-Y. Corporate houses & MPs to be requested to invest in improving passenger amenities at Railway stations through CSR & MPLAD funds; Divisional Committees in each Railway to be chaired by Members of Parliament. 

Station Redevelopment 

Station redevelopment policy to be revamped and processes simplified by inviting open bids; present stations be available for development on “as is where is” basis, to exploit the space and air rights on concession basis; Zonal and Divisional offices be empowered for quicker decision making;Land will not be sold; Development of 10 Satellite Railway terminals in major cities with twin purpose of decongesting the city and providing service to n suburban passengers. 

Capacity Augmentation 

Network expansion: 

  •  Decongesting networks with basket of traffic generating projects priority; priority to last mile connectivity projects ; fast track sanctioned works on 7,000 kms of double/third/fourth lines and commission 1200 km in 2015-16 at an investment of Rs. 8686 crore, 84% higher Y-O-Y. 
  •  Commissioning 800 km of gauge conversion targeted in current fiscal.  77 projects covering 9,400 km of doubling/tripling/quadrupling works along with electrification, covering almost all States, at a cost of Rs. 96,182 crore which is over 2700% higher in terms of amount sanctioned. 
  •  Traffic facility works a top priority with outlay of Rs. 2374 crore .  In the North East States, Meghalaya brought on the Railway map of India and direct connectivity to Delhi provided. Barak Valley to be connected on BG . 
  •  Award of 750 km of civil contracts and 1300 km of system contracts in 2015-16 on Dedicated Freight Corridor; 55 km section of Eastern DFC to be completed in the current year. Preliminary Engineering cum Traffic Survey (PETS) for four other DFCs in progress. 
  •  Acceleration of pace of Railway electrification: 6,608 route kilometers sanctioned for 2015-16 ,an increase of 1330% over the previous year.

    Expansion of freight handling capacity
  •  Transport Logistics Corporation of India (TRANSLOC), to be set up for developing common user facilities with handling and value-added services to provide end-to-end logistics solution at select Railway terminals through Public Private Partnerships. Page 4 of 8 
  •  For the benefit of our farmers, a state of the art Perishable Cargo Centre under completion at the Azadpur Mandi with a scientific banana-ripening Centre; air cargo sector to be developed to facilitate and integrate the movement of air cargo between ICDs and the gateway airports.  Policy for Private Freight Terminals (PFT) to be revised. 
  •  Automatic Freight Rebate Scheme for traffic to be expanded 
  •  Long haul freight operations to be used extensively; construction of long loop lines to be expedited. Distributed power system for multi-loco haulage to be accelerated
    Improving train speed
  •  Speed of 9 railway corridors to be increased from existing 110 and 130 kmph to 160 and 200 kmph respectively so that inter-metro journeys like Delhi-Kolkotta and Delhi-Mumbai can be completed overnight. 
  •  Average speed of freight trains in empty and loaded conditions, will be enhanced to 100 kmph for empty freight trains and 75 kmph for loaded trains; loading density on all major freight bearing routes to be upgraded to 22.82 tonne axle loads

  • . Bullet train
  •  Feasibility study for High Speed Rail between Mumbai-Ahmadabad is in advanced stage and report expected by the mid of this year. For other high speed routes on the diamond quadrilateral, studies are being commissioned. 
  • Upgrading manufacturing capability 
  •  Creation of job opportunities by upgrading the manufacturing capability. 
  •  Functioning of Indian Railways Production Units and Workshops would be reviewed to provide them a cutting edge; measures for technological upgradation and enhancing productivity be undertaken to make them self-sustaining. 

  •  Action plan being prepared for areas where accidents occur: five-year corporate safety plan by June 2015 indicating annual quantifiable targets; Pending recommendations made by High Level Safety Review Committee headed by Dr. Kakodkar Committee to be examined by April 2015. 
  •  RDSO to develop a suitable device with reliable power supply system based on theft-proof panels/batteries in consultation with Indian Space Research Organization, using geo-spatial technology for providing audio-visual warning to road users at unmanned level crossings; radio based signal design project been taken up with IIT Kanpur for warnings at unmanned level crossing. 
  •  970 ROB/RUBs and other safety-related works to eliminate 3438 level crossings at a total Railway expense of Rs. 6,581 crore have been sanctioned which is 2600% higher than the previous year covering most States. 
  •  Train Protection Warning System and Train Collision Avoidance System to be installed on select routes at the earliest. 
  •  Modern track structure consisting of sleepers and heavier rails being used while carrying out primary track renewals. Better welding techniques being promoted; digital type machines to replace analogue type machines.
Technology upgradation 

  •  Constituting an innovation council called “Kayakalp” for business re-engineering and introducing a spirit of innovation in Railways. 
  •  Technology portal being constituted to invite innovative technological solutions. 
  •  Strengthening of RDSO into an organization of excellence for applied research; four Railway Research Centers to be set up in select universities for fundamental research; ‘Malaviya Chair’ for Railway Technology at IIT (BHU), Varanasi to be set up. 
  •  Consortium of Ministry of Railways, Ministry of Human Resource Development, Ministry of Science And Technology and Industries on to take up identified Railway projects for research. 
  •  IT vision to be unveiled: information on latest berth availability station navigation system, bar coded/RFID tracking of parcels and freight wagons, automated parcel warehouses. Integration of train control and asset management applications. 
  •  Mechanize integrated track maintenance. 

Partnerships for development 

  •  PPP cell to be revamped to make it result oriented. 
  •  Projects for rail connectivity to many ports and mines being developed under participative models; simplification of procedures and consistency of policy to be ensured. 
  •  “Foreign Rail Technology Cooperation scheme” to be launched.
  •   MUTP III for Mumbai to be taken up. 
  •  Joint ventures to be set up with States for focused project development, resource mobilization, land acquisition, project implementation and monitoring of critical rail projects. 
  •  JVs to be set up with major public sector customers for meeting requirements of new lines. 

Improvements to Management Processes and Systems 

  •  Delegate, de-centralize, de-regulate & simplify to be the new mantra. 
  •  Systems audit to be conducted for review of all processes and procedures. 
  •  Global benchmarks for key operating and maintenance activities. 
  •  Improve appraisal mechanism for the selection of projects and introduce simulation tools for project planning and decision-making; introducing EPC system of contracting. 
  •  Constitution of a working group to modify present system of accounting, to ensure tracking of expenditure to desired outcomes.  Train operations to be audited. 
  •  Paperless working in material management system to be expanded; Vendors to be integrated through Vendor Interface Management System to provide single window interface to vendors. 

Resource Mobilisation 

  •  Plan Budget up by 52% from Rs. 65,798 crore to Rs. 1,00,011 crore in 2015-16. Support from the Central Government 41.6% of the Plan and Internal generation 17.8 %; setting up of a Financing Cell in the Railway Board.Page 6 of 8 
  •  Setting up an infrastructure fund, a holding company and a JV with an existing NBFC of a PSU with IRFC, for raising long term debt from domestic as well as overseas sources, including multilateral and bilateral financial institutions. Monetisation of assets rather than selling them. 
  •  Digitized mapping of land records and responsibility fixing for encroachments.  New strategy to tap latent advertising potential, including offering stations and trains for corporate branding. 
  •  Coastal Connectivity Program. Railways in partnership with ports will deliver rail connectivity to Nargol, Chharra, Dighi, Rewas and Tuna. 
  •  Projects worth Rs 2500 crore through BOT/ Annuity route. These include Wardha- Nagpur 3rd line, Kazipet-Vijaywada 3rd line, Bhadrak –Nargundi 3rd line and Bhuj- Nalia Gauge Conversion.  Scrap disposal policy to be reviewed for speedier scrap disposal. 

Human Resources 

  •  Human Resource Audit to be undertaken. Focused Human Resource strategy to raise employee productivity in line with global standards. Separate accounting head for HRD. ERP based Human Resource Management System. 
  •  Special training module on soft skills for frontline staff so that our customers feel welcomed. Training in yoga. 
  •  Setting up a full-fledged University during 2015-16. 
  •  Improved delivery of health services to employees: Upgradation of four Holiday Homes. 

Energy and sustainability

  •  Environment Directorate to be constituted in Railway Board to give increased focus and thrust on environment management. 
  •  Detailed energy audit for energy saving. 
  •  Procure power through the bidding process at economical tariff from generating companies, power exchanges, and bilateral arrangements. Initiative likely to save at least Rs. 3,000 crore in next few years. 
  •  Solar Power as part of the Solar Mission of Railways. 1000 MW solar plants will be set up by the developers on Railway/private land and Railway buildings with subsidy/viability gap funding support of Ministry of Non-Renewable Energy in next five years. 
  •  Water conservation mission including water audit and expansion of water harvesting systems.  Accreditation for environment management to be extended. 
  •  100 DEMUs to be enabled for dual fuel – CNG and diesel. Locomotives running on LNG are also currently under development.
  •   Noise levels of locos to be at par with international norms; concerns related to wildlife to be addressed.  Investing in Indian Railways necessary for our ecological sustenance mainly due to efficiencies of fuel consumption.

Transparency and Governance initiatives 

  •  System of on-line applications introduced for two categories of recruitment as a pilot project- to be extended. 
  •  All possible solutions be explored to address menace of corruption. 
  •  E-procurement value chain being expanded. 
  •  Constituting a mechanism for making regulations, setting performance standards, determining tariffs & adjudicating disputes among licensees/private partners and the Ministry, subject to review in appeal. 

Social initiatives 

 Infrastructure like stations and training centers to be made available for skill development. Indian Railways personnel and their services also available for this national cause.  Promotion of products made by Self Help Groups, consisting mainly of women and youth on the model of Konkan Railway. 


  •  Incredible Rail for Incredible India to be launched; Promotion of training of auto-rickshaw and taxi-operators as tourist-guides on the model of Konkan Railway. 
  •  Coaches in select trains connecting major tourist destinations to travel agencies may be offered on a revenue sharing model.  IRCTC to work on promoting the Gandhi circuit to attract tourists to mark the occasion of 100 years of the return of Mahatma Gandhi to India from South Africa; IRCTC will work on Kisan Yatra, a special travel scheme for farmers for farming & marketing technique centres. 


  •   Net reduction in Gross Traffic Receipts by Rs 917 crore compared to the BE of Rs 1,60,165 crore. 
  •  Growth in Ordinary Working Expenses (O.W.E) scaled down to 11.7% as against BE of 15.5% y-o-y. Taking into account the likely savings accruing from drop in prices of HSD (high speed diesel) for traction partly offset by higher requirements under certain heads for maintenance, safety and cleanliness activities, the budgeted O. W. E. of Rs 1,12,649 crore decreased in the RE 2014-15 to Rs. 1,08,970 crore i.e. by Rs 3,679 crore. 
  •  Appropriation to the Pension Fund has been increased to Rs. 29,540 crore in RE. Internal resource generation also improved and accordingly the appropriation to DRF has been scaled up to Rs 7,975 crore in RE from the BE 2014-15 provision of Rs 7,050 crore. After taking into account the above, "Excess" of receipts over expenditure stands at Rs 7,278 crore in RE 2014-15 reflecting better financial management. Plan size for 2014-15 increased from Rs 65,445 crore in the B.E to Rs 65,798 crore in the Revised Estimates i.e. by Rs 353 crore with higher provisions under internal resource component and market borrowings for rolling stock requirement.

Budget Estimates for 2015-16.

  •  The intention is to capture increased revenues and ensure appropriate investments so as to decongest the system and enhance line-capacity. 
  •  Passenger earnings growth pegged at 16.7% and target budgeted at Rs. 50,175 crore. 
  •  Freight traffic is pegged at an all time high incremental traffic of 85 million tonnes, anticipating a healthier growth in the core sector of economy; Goods earnings proposed at Rs. 1,21,423 crore which includes rationalisation of rates, commodity classification and distance slabs.  Other coaching and sundries are projected at Rs. 4,612 crore and Rs. 7,318 crore. 
  •  Gross Traffic Receipts estimated at Rs 1,83,578 crore , a growth of 15.3%. 
  •  Ordinary Working Expenses proposed to grow at 9.6% over RE 2014-15. Traction fuel bill anticipated to shrink further. 
  •  Higher provisions made for safety maintenance and cleanliness. Lease charges, interest component of the current and previous market borrowings, at a growth of 21%.  Appropriation to Pension Fund proposed at Rs 35,260 crore and appropriation to DRF at Rs 8,100 crore. Appropriation of Rs 7,616 crore proposed to be made to Capital Fund for payment of principal component of lease charges to IRFC. 

Plan Outlay 2015-16 

 Gross Budgetary Support of Rs 40,000 crore for the Railway’s annual Plan. Rs 1,645.60 crore has also been provided as Railway’s share of diesel cess from the Central Road Fund. Market borrowing under EBR projected at Rs 17,655 crore, an increase of about 46.5%. Balance Plan outlay includes Rs 17,793 crore from Internal Resources and Rs. 5781 crore from PPP. Significantly, we are allocating large amounts towards Doubling, Traffic Facilities, Electrification and Passenger Amenities.  Given the huge shelf of project and ensuring proper funds flow for the same with a view to completing them on target, a new financing approach to expand EBR has been projected. This EBR, presently named EBR (Institutional Finance) would be based on institutional investments in railway projects through Railway/ PSUs. This element is projected at Rs 17,136 crore and is aimed at accelerating completion of capacity augmentation projects. Works proposed to be financed through this mode are listed in the Budget documents.  Plan Outlay is Rs 1,00,011 crore, an increase of 52% over RE 2014-15. It is anticipated that the Plan size will get higher once resources from institutional bodies are formalized during the course of the ensuing financial year. 


 Complete the review of speed restrictions soon.  All critical initiatives to be pursued in mission mode under designated senior officials in the Ministry of Railways as Mission Directors; similar structure replicated in all Zonal Railways. 


Indian Railway Budget Speech 2015-16
Speech of Shri Suresh Prabhakar Prabhu introducing the
Railway Budget for 2015-16 on 26th of February, 2015
Madam Speaker,

1. I rise to present before this August House the Statement of Estimated Receipts and Expenditure for 2015-16 for Indian Railways.

2. At the outset, let me thank the Hon’ble Prime Minister, Shri Narendra Modi ji, for infusing all Indians with a renewed sense of pride and refreshed the dream of prosperous nation. At a more personal level, I wish to express my gratitude towards him for giving me this opportunity to serve the people of India through the medium of Railways which is his priority. The Prime Minister established the principle of governance when he asked what government was for if not for the welfare of the poor. He challenged us with an inspirational objective when he said that the age of poverty alleviation was over and that the era of poverty elimination had begun. Indian Railways will play its part in this historic mission.

3. Madam Speaker, the railway map of India is a network of veins that pump life-giving blood into the heart of India’s economy. Indian Railways is a unique integrator of modern India, with a major role in its socio-economic development.It is an organization that touches the hearts and existence of all Indians, even Mahatma Gandhi. Bapu decided to undertake a voyage of discovery of India before launching himself into the national freedom movement. And he conducted this Bharat Darshan on trains, always travelling in third class.

4. Unfortunately, Railway facilities have not improved very substantially over the past few decades. A fundamental reason for this is the chronic underinvestment in Railways, which has led to congestion and over-utilization. As a consequence, capacity augmentation suffers, safety is challenged and the quality of service delivery declines, leading to poor morale, reduced efficiency, sub-optimal freight and passenger traffic, and fewer financial resources. This again feeds the vicious cycle of under-investment.

5. This cycle must be put to an end. Once it does, the gains to the economy will be immense: better services, improved connectivity for all citizens including the poorer segments of our society, lower costs and improved competitiveness.  investment in the Railways will have a large multiplier effect on the rest of the economy and will create more jobs in the economy for the poor. Investment in Indian Railways is also necessary for environmental sustainability and well being of future generations.

6. Madam Speaker, the Indian Railways carry a heavy burden of expectations. Citizens who demand better railway services are often not aware of the constraints that the Railways operate under. I wish to flag two; there are 1219 sections on the high-density network, which can be roughly equated with tracks connecting the metros. Out of these, 492 are running at a capacity of more than 100% and
there are another 228 that are running at a capacity of between 80% and 100%. If a section is over-stretched, the entire line is over-stretched. There is no slack available for maintenance and train speeds slow down. On a single track, the Indian Railways have to run fast express trains like Rajdhani and Shatabdi, ordinary slow passenger trains as well as goods trains. Is it surprising that though Rajdhani and Shatabdi are capable of doing 130 km/hour, the average speed does not exceed 70? Is it surprising that the ordinary passenger train or a goods train cannot average more than around 25 km/hour?

7. In the next five years, our priority will be to significantly improve capacity on the existing high-density networks. Improving capacity on existing networks is cheaper. There are no major land acquisition issues and completion time is shorter. The emphasis will be on gauge conversion, doubling, tripling and electrification. Average speed will increase. Trains will become more punctual. Goods trains can be timetabled.

पर मेरे मन मɅ सवाल उठता है – हेĤभु, ये कै से होगा ?
Ĥभु ने तो जवाब नहȣं Ǒदया, तब ये Ĥभु ने सोचा Ǒक
गांधीजी ǔजस साल भारत आये थे, उनकȧ शताÞदȣ वष[ मɅ
भारतीय रेलवे को एक भɅट िमलनी चाǑहए, Ǒक पǐरǔèथित
बदल सकती है, राèते खोजे जा सकता है, इतना बड़ा देश,
इतना बड़ा network, इतने सारे resources, इतनी
ǒवशाल manpower, इतनी strong political will, तो
Ǒफर Èयɉ नहȣं हो सकता रेलवे का पुनज[Ûम...

8. I am reminded of a novel by Shubhada Gogate titled 
खÛडाäयाÍयाघाटासाठȤ, “khandalyachya ghatasaathi”. The novel is a fictionalized account of India’s first railway line being constructed crossing the Sahyadri range. You build a section at a time. You build a tunnel at a time. You then move on to the next section and the next tunnel. You build bit by bit. We must restore the strength of Bhartiya Rail as the backbone of our country’s transportation infrastructure. Bhartiya Rail must substantially regain the market share of freight transport. Rail transport must be made reliable, comfortable and safe and benchmarked to global standards.

कु छ नया जोड़ना होगा, कु छ पुराना तोड़ना होगा, कु छ
engine बदलने हɉगे, कु छ पुजȶ repair करने हɉगे, कु छ
ताकतɅ Ǒदखानी होगी, कु छ कमजो़ǐरयाँ िमटानी होगी, कु छ
राèते बदलने हɉगे, कु छ Ǒदशाएं खोलनी पड़ेगी .....

I am convinced we can deliver. But we cannot deliver overnight. We will build bit by bit, incrementally. The legacy of past decades will take some time to neutralize.

9. I believe that good governance emerges out of participative government. In a very short span of time I have visited most of the states; tried to interact with many employees, stakeholders and customers. I took the initiative to connect directly with the users through social media. I am glad to inform that over 20000 suggestions were received and we have already started working on the feasible ones. You may also find some incorporated in this budget. This experiment gave me an insight into how involved people are with the Railways and their will to see it getting better and reaffirming its position as the growth engine of this country.

10.We have prepared a forward-looking agenda. Over the next five years, IR has to go through a transformation. We have fixed four goals for ourselves.
a) To deliver a sustained and measurable improvement in customer experience.
We are launching initiatives that will systematically address customer concerns about cleanliness,
comfort, accessibility, service quality and speed of trains.

b) To make Rail a safer means of travel.

c) To expand Bhartiya Rail’s capacity substantially and to modernise infrastructure.

Given the importance of rail travel for our citizens we will increase our daily passenger carrying capacity from 21million to 30 million. We will also increase track length by 20% from 1,14,000 km to 1,38,000 km, and we will grow our annual freight carrying capacity from 1 billion to 1.5 billion tonnes.
d) Finally, to make Bhartiya Rail financially self-sustainable. This will mean generating large surpluses from our operations not only to service the debt needed to fund our capacity expansion, but also to invest on an on-going basis to replace our depreciating assets.

This will require material improvement in operating efficiency, tighter control over costs, greater discipline over project selection and execution, and a significant boost to Railways’ revenue generating 

Download the copy of budget speech in English Click Here and in Hindi Click Here.

हिंदी में बजट भाषण की प्रति डाउनलोड के लिए यहां क्लिक करें

Wednesday, February 25, 2015


We are sharing a 35 Minute video from Sujeet Kumar on two excel functions "Count if "and "Sum if". Both of formula are very useful and can be used in day to day use of excel.The video given below is with Hindi instruction which is more useful for larger number of viewers.

Count if 
Applies criteria to cells across multiple ranges and counts the number of times all criteria are met.

Sum if 
Applies criteria to cells across multiple ranges and Sum the number of times all criteria are met.

Pre-deposit has to be waived off if Assessee’s case is a good/ strong prima facie case covered by a binding precedent

We are sharing with you an important judgment of Hon’ble High Court, Allahabad, in the case of Shukla & Brothers Vs. Customs, Excise & Service Tax Appellate Tribunal [(2015) 54 182(Allahabad)]on the following issue:
Whether it is possible to waive off the Pre-deposit,when Assessee’s case is a good/ strong prima facie case covered by a binding precedent?
Facts & background:
Shukla & Brothers (“the Appellant”) is a proprietorship firm registered under Service tax under the category of 'Construction Work'. However, under some confusion and misguidance, the Appellant was issued registration under ST-2 in the category of 'Civil Structure Construction Work'. The Appellant claimed that the services provided are of maintenance/ sanitation services provided at factory premises of clients, which does not fall within the Service tax net.
Thereafter, the Show Cause Notice was issued to the Appellant demanding the alleged amount of Service tax along with interest and penalties, which was further confirmed by the Adjudicating Authority. Being aggrieved, the Appellant filed an appeal before the ld. Commissioner (Appeals) but the same was rejected.
Thereafter, the Appellant filed an appeal before the Hon’ble CESTAT, Delhi. The Hon’ble Tribunal vide a non-speaking Order dated February 26, 2013 (“Impugned Order”) ordered pre-deposit of 40% of the demand under Section 35F of the Central Excise Act, 1944 made applicable to the Finance Act, 1994 (“the Finance Act”) vide Section 83 thereof. Later vide Order dated April 11, 2013, the Hon’ble Tribunal dismissed the appeal filed by the Appellant for non-compliance of condition of pre-deposit. Being aggrieved, the Appellant filed an appeal before the Hon’ble High Court of Allahabad.
The Hon’ble High Court of Allahabad held as follows:
·      It has been a uniform view of various Courts that while considering provisions of pre-deposit of duty and penalty, the Authority concerned has to examine the question as to whether the Assessee has a good prima facie case so as to justify the dispensation of requirement of pre-deposit.
Further, the Authority must exercise its discretion to dispense with such requirement particularly in a case where the Assessee satisfies the Appellate Authority that his case is squarely covered by the decision of a competent court binding on it and in such cases, asking the appellant to deposit the duty demanded and the penalty levied would cause undue hardship to the Appellant - Hindustan Ferro & Industries Ltd. Vs. CESTAT [2006 (205) ELT 153 (All)]; B.P.L. Sanyo Utilities & Appliances Ltd. Vs. Union of India [1999 (108) E.L.T. 621]; Andhra Civil Construction Co. Vs. CEGAT [1992 (58) E.L.T. 184]; J.N. Chemical (P.) Ltd. Vs. CEGAT [1991 (53) E.L.T. 543].
·      For a good or strong prima facie case, it is not necessary for the Assessee to satisfy the Tribunal that his case is full proof and is bound to succeed. Strong prima facie case would mean that the case is an arguable one and fit for trial, or prima facie covered by a binding precedent. In such a situation, the Tribunal is under a legal obligation to consider the application of waiver taking into account the undue hardship which would require examination of prima facie case, on merits;
·      The Impugned Order, running into six lines and directing the Appellant to deposit 40% of the demand is sans any reason and as such is cryptic.
Therefore, the Hon’ble High Court set aside the Impugned Order and the matter was remitted back to the Hon’ble CESTAT, Delhi for re-determine the issue and passing fresh orders on the applications for waiver of the condition of pre-deposit and the appeal itself thereafter.
Our Comments:
Effective from August 6, 2014, the Finance (No. 2) Act, 2014 substituted new Section 35F of the Central Excise Act, 1944 which is also applicable for Service tax vide Section 83 of the Finance Act, 1994 and for Customs vide Section 129E of the Customs Act, 1962 prescribing a mandatory fixed pre-deposit of:
a) 7.5% of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, for filing of appeal before the Commissioner(Appeals) or the Tribunal at the first stage; and
b) 10% of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, for filing second stage appeal before the Tribunal.
However, the amount of pre-deposit payable is subjected to a ceiling of Rs 10 Crore.
The said amendment has done away with the requirement of filing stay applications for waiver of pre-deposit. However, it is to be noted that all pending appeals/ stay applications would be governed by the statutory provisions prevailing at the time of filing such appeals/ stay applications.
Now, even though the above stated judgment of the Hon’ble High Court of Allahabad pertains to the period prior to August 6, 2014, the moot question still remains as to whether the Assessee is required to make mandatory pre-deposit under the new provisions even when his/her case is covered by a binding precedent. Hope that the Board may come out with some clarification in this regard.
Bimal Jain
FCA, FCS, LLB, B.Com (Hons)

Tuesday, February 24, 2015

Late Filing fees u/s 234E is constitutionally Valid :Bombay High Court

Section 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day's delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). The provision for Levy of Late filing fee was introduced to improve Filing Compliance and to avoid subsequent inconvenience to the taxpayers due to inordinate delays in availability of tax credits in their 26AS Statements. 

This assumes further significance in view of the decision of the Hon'ble High Court of Bombay, dated February 6 2015, upholding the validity of the Levy for Late Filing u/s 234E. The court has observed the following in its decision in the case of Rashmikant Kundalia vs. UOI: 

Saturday, February 21, 2015

Service Tax on Charitable and Religious Trusts

The Mega Exemption Notification No. 25/2012 dated 20th June 2012 exempts from whole of service tax services provided by charitable trusts registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities. But a broad analysis of this notification and all other service tax provisions reveals that all services provided by such charitable trusts are not exempt. There are many services that are provided by charitable trusts that are still taxable. The author in this article analyses the ambit of services provided by charitable and religious trusts and she goes on to determine the taxability factor of those services vis-à-vis the provisions of Service Tax in this interesting analysis. Read on…

On a plain reading of services tax provisions relating to charitable trust, it may be concluded that services provided by charitable and religious trusts are exempt. After the drastic change related to service tax provisions after 1st July 2012, it is clear that all services provided by charitable and religious trusts are not exempt. In-depth analysis of service tax provisions related to charitable trust proves that many services provided by charitable and religious trusts are liable to the service tax. Mega Exemption Notification no. 25/2012 has made exemption from service tax to charitable and religious trust more specific and even more restrictive. Therefore, it will be interesting to note and analyse the services provided by charitable and religious trusts and ascertain their taxability as per the service tax provisions. 

Entry No. 4 of Mega Exemption Notification No. 25/2012 dated 20th June 2012 specifies that services by an entity registered under Section 12AA of Income-tax Act, 1961 by way of charitable activities are exempt from whole of the service tax. Thus as per this notification, restrictive exemption is given to the charitable trusts. If charitable trusts satisfy the following two conditions, services provided by them are exempt: 

I. Charitable trusts must be registered under Section 12AA of the Income-tax Act, and 
II. Activities carried out by charitable trusts should be charitable. Meaning of Charitable Activities 

According to the notification, Charitable activities means activities relating to: 

(1) Public health by way of- 

(a) care or counseling of 
(i) terminally ill persons or persons with severe physical or mental disability,
(ii) persons afflicted with HIV or AIDS, or 
(iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or 
(b) Public awareness of preventive health, family planning or prevention of HIV infection; 

(2) Advancement of religion or spirituality; 

(3) Advancement of educational programs or skill development relating to – 
(a) abandoned, orphaned or homeless children; 
(b) Physically or mentally abused and traumatised persons; 
(c) prisoners; or 
(d) persons over the age of 65 years residing in a rural area; 

(4) Preservation of environment including watershed, forests and wildlife; or, 

(5) Advancement of any other object of general public utility up to a value of – 

(a) eighteen lakh and seventy five thousand rupees for the year 2012-13 subject to the condition that total value of such activities had not exceeded twenty five lakh rupees during 2011-12; 

(b) twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakh rupees during the preceding financial year. 

Prior to 1st March 2013, in addition to the above listed activities, charitable trusts enjoyed exemptions for charitable activities related to advancement of any other object of general public utility also. But vide Notification No. 3/2013 dated 1st March 2013, this exemption was withdrawn and maximum exemption for the amount paid in respect of advancement of any other object of general public utility was set to Rs 10 lakh as available to other small service providers. 

As per the Notification No. 25/2012, general public means the body of people at large sufficiently defined by some common quality of public or impersonal nature. This definition has made the exemption to charitable trusts available for charitable activities more specific. While the income from only those activities listed above is exempt from the service tax, that from the rest is taxable. So, a broad analysis of the above definition shows that there are many services provided by charitable and religious trust which are not considered as charitable activities and hence, such services come under the service tax net. Some of such services are:

Renting of immovable property and conduct of religious ceremony by charitable or religious trusts: Entry no. 5 of Notification No. 25/2012 exempts the services by a person by way of 

(a) renting of precincts of a religious place meant for general public, or 

(b) conduct of any religious ceremony. 

Meaning of religious place as per above notification is religious place means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality. Dictionary meaning of precincts is An area within the walls or perceived boundaries of a particular building or place, an enclosed or clearly defined area of ground around a cathedral, church, temple, college, etc. So if immovable properties owned by charitable trusts like marriage hall, convention hall, rest house for pilgrims, shops situated within the premises of a religious place are rented out, income from letting out of such property is wholly exempt from service tax. 

But if such properties are not situated in the precincts of a religious place meaning thereby not within walls or boundary walls of the religious place, income from such letting out will lose this exemption and income from it will be liable to service tax. 

Some experts are of the view that temporary accommodation to pilgrims at rest houses governed by charitable trust should not be liable to service tax, as this is not renting of commercial place, but it is a temporary facility of letting out of rest houses near religious place owned by charitable and religious trust and which are made available only to pilgrims who have visited the religious place. There is no commercial intention of earning income behind such letting out, but the only intention here is to facilitate pilgrims for their visit to the religious place. But this is always a matter of litigation. If charitable trusts rent out their offices or shops to the Government or the Governmental authority, rental income thus produced is also chargeable to service tax. Income from religious ceremony organised by a charitable trust is exempt as per the above notification. 

So the income from Navratri functions,other religious functions, and religious poojas conducted on special occasions like religious festivals by persons so authorised for this purpose by the charitable or religious trust are exempt from service tax. But a broad analysis of this exemption shows that all income from such a religious ceremony is not exempt. The nature of income is an essential factor in these circumstances. If income loses its religious nature, it is definitely chargeable to service tax. For example, if with regard to Navratri or other religious functions, charitable trusts rent out their space to agencies for advertisement hoardings, income from such advertisement is chargeable to the service tax, as this will be considered as income from the advertisement services. Here some experts are of view that this will be considered under negative list under exemption for selling of space or time slots for advertisement other than advertisements broadcast by radio or television services. But it is a matter of litigation also. Then, if donation for religious ceremony is received with specific instructions to advertise the name of a donor, such donation income will amount to the service tax. But if donation for religious ceremony is received without such instructions, it will not be chargeable to service tax. 

Services provided by way of construction of religious place: Entry No. 13(c) of Notification No. 25/2012 exempts this service by specifying that services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a building owned by an entity registered under Section 12AA of the Income-tax Act, 1961 and meant predominantly for religious use by general public. Thus, if charitable trusts give works contract for construction of temple, hospital, school, etc., service tax on such works contract is exempt. But essential condition for claiming this exemption is that it must be used for general public or for religious purpose. If it is used for commercial purpose, it is not exempt  from service tax. So if charitable trust constructs offices to give them on rent, service tax is applicable on such works contract. 

Service tax on management of educational institutions by charitable trusts: If trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, activities will be considered as charitable and income from such services will be wholly exempt from the service tax. 

Meaning of the word rural area defined in said notification is rural area means the area comprised in a village as defined in land revenue records excluding the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee or any area that may be notified as an urban area by the Central Government or a State Government. Also as per the entry no. 34(b) of above notification, if charitable trusts registered under Section 12AA of Income-tax Act providing educational services receive any service from provider of services located in non-taxable territory, such services received are not chargeable to service tax under the reverse charge mechanism. If the trust is running school for the purpose which is not covered above, income from such activity will not be exempt under entry no. 4 of Mega Exemption Notification, but will be exempt under Clause (12) of the negative list. 

If trust having boarding school, taxability of such service will be determined as per principles laid down under Section 66F of the Act. Moreover, if such school or other educational institution gives property owned by such institution on rent to others, no exemption will be available for such services. 

Moreover, if educational institutions managed by charitable trusts provide service by way of renting of any immovable property, that will be chargeable to the service tax. Now, the exemption provided to educational institutions in respect of renting of immovable property by them is withdrawn vide Notification No. 3/2013 dated 1st March 2013 applicable from 1st April 2013 due to removal of the phrase provided by educational institution from entry no. 9 of Mega Exemption Notification. 

After the amendment made by the Finance Act, 2014 vide Notification No. 6/2014-ST dated 11th July 2014, exemption for services provided by way of renting of immovable property to educational institution is withdrawn. So after 11th July 2014, renting of immovable property to and by educational institutions managed by charitable trusts-both are chargeable to service tax. 

Also the concept of auxiliary educational services is withdrawn vide Notification No. 6/2014-ST and now only following services received by eligible educational institution are exempt: 

(1) Transportation of students, faculty and staff of the eligible educational institution. 
(2) Catering service including any mid-day meals scheme sponsored by the Government. 
(3) Security or cleaning or house-keeping services in such educational institution. 
(4) Services relating to admission to such institution or conduct of examination. 

So after the amendment made vide the Finance Act, 2014, all services received by educational institutions managed by charitable trusts except those services mentioned above are taxable. 

Service tax on arranging yoga and meditation camp by charitable trusts: Charitable trusts organise yoga camps or other fitness camps and they generally are not free for participants, as trusts charge some amount from the participants in the name of accommodation or participation. If trusts are arranging residential or non-residential yoga camps by receiving donation or other charges from the participants, these will not be considered charitable activities. As donation is received for participation, it will be considered commercial activity and it will definitely be covered under the service tax net. Similarly, if charitable trusts organise fitness camps in reiki, aerobics, etc., and receive donation from participants, such income that comes under health and fitness services will also be taxable. Recently, the service tax department had served a notice of demand for a big amount to a well-known charitable trust for not depositing service tax on service of arranging yoga camp organised across the country. 

Service tax on running of public libraries by charitable trusts: No service tax will be applicable if charitable trusts are running public libraries and lend books, other publications or knowledge-enhancing content/material from their libraries. This activity is specifically excluded by way of entry No. 35 of Notification No. 25/2012, which means services of private libraries are not exempt. But the question is whether libraries run by charitable trusts that lend books only to members of libraries and charge subscription or membership fees will be called public library. It is essential to find out the meaning of public library. The meaning of public library has not been defined anywhere in the Act. But as per the old definition of public library issued by UNESCO, maintenance of public library should be out of public funds and it must provide free services to all. If this definition is accepted, most of the libraries managed by charitable trusts serving the public will be considered private, since some nominal amount is charged from members and readers in the name of subscription or other services. But as per the modern definition of Public Library approved by UNESCO and IFLA, public libraries are those libraries which serve the population of a community or region free of charge or for nominal fees. Thus, if donors of public library remain open to all and if it caters to educational, informational and recreational needs of its users and finance for such libraries can be provided from donation, subscription, from special fund created for this purpose or from combination of all such sources, it will be called public library and no service tax will be applicable on such services. 

Service tax on hospital managed by charitable trusts: Mega Exemption Notification No. 25/2012 exempts healthcare services at clinical establishment, an authorised medical professional or paramedics. All treatment or diagnosis or care for illness, injury, deformity, abnormality or pregnancy by a clinical establishment is covered. Such services provided by doctors and paramedics either provided as an employee or in their individual capacity is exempt. Transportation of patients to and from a clinical establishment is also exempt. The clinical establishment means any hospital, nursing home, clinic, sanatorium or private diagnostic centre like x-ray clinic, pathological laboratory or any diagnostic or investigation centre. So, if charitable trusts run a hospital and appoint specialist doctors, nurses and provide medical services to patients at a concessional rate, such services are not liable to service tax. If hospitals hire visiting doctors/specialists and these deduct some money from consultation/visit fees payable to doctors and the agreement between hospital and consultant doctors is such that some money is charged for providing services to doctors, there may be service tax on such amount deducted from fees paid to doctors. But if the agreement is such where amount of fee payable to doctors is fixed and no money is deducted from fees, no service tax will be applicable. 

Service tax on services provided to charitable trusts: Services provided to charitable trusts are not out of ambit of service tax. In fact, charitable trusts are liable to service tax under reverse charge mechanism also. Only under partial reverse charge mechanism (Proportional/Joint), charitable trust is not required to pay service tax. Three services are covered under partial reverse charge i.e., renting of motor vehicle to carry passengers, Manpower supply and security services and Works contract service. For these three services, reverse charge is applicable only when service receiver is business entity registered as body corporate and service provider is individual, Hindu undivided family (HUF), firm (including LLP) and association of persons (AOP). Meaning of business entity given under the Act is, business entity means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. So, charitable trusts cannot be considered as business entity for these three services. Also as per the Act, Body Corporate includes company, corporation and LLP, but does not include trusts. So, reverse charge is not applicable to charitable trust for these three specified services in both cases, where charitable trust is service provider or service receiver. For other services, reverse charge is applicable to charitable trust subject to conditions specified for taxability of respective services. 

Interest on delayed refund is permissible from expiry of 3 months’ from the date of filing of Refund

We are sharing with you an important judgment of Hon’ble CESTAT, Ahmedabad, in the case of Tata Chemicals Ltd. Vs. Commissioner of Central Excise, Rajkot [2015-TIOL-240-CESTAT-AHM]on the following issue:
Whether Interest on delayed refund is permissible from expiry of 3 months from the date of filing Refund application?
Facts & background:
In the present case, Tata Chemicals Ltd. (“the Appellant”) filed eleven Refund claims amounting to Rs. 1,26,78,767/- during the period September 1997 to December 1999. However, the Refund claims were initially rejected by the Adjudicating Authority and the Ld. Commissioner (Appeals).
However, the same were allowed by the Hon’ble CESTAT, Ahmedabad vides its Order dated August 13, 2003 which was paid to the Appellant on February 23, 2004.
Since there was a delay in sanction and payment of Refunds, for more than three months from the date of filing of Refund applications, the Appellant applied for interest on delayed payment of Refunds under Section 11BB of the Central Excise Act, 1944 (“the Excise Act”) up to the date of refund  i.e., February 23, 2004.
However, this request was rejected by Adjudicating Authority, which was followed by the Ld. Commissioner (Appeals). Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Ahmedabad.
The Appellant relying upon following cases:
·      Tirupati Pipe & Allied Industries Pvt. Ltd. Vs. CCE 2008 [(227) ELT 247 (Tri-Mum) 2007-TIOL-1862-CESTAT-MUM]
·      Ranbaxy Laboratories Ltd Vs. UOI [2011 (273) ELT 3 (S.C.)](“the Ranbaxy Laboratory case”).
·      J.K. Cement Works Vs. ACCE & C 2004 (170) ELT 4 (Raj.) and AC Vs M/s J.K. Cement Works [2005 (179) ELT A-150 (S.C.)]
·      Jayanta Glass Ltd Vs. CCE Kolkata [2004 (165) ELT 516 (Tri-LB)]
·      Rama Vision Ltd Vs. CCE Meerut [2004 (170) ELT 13 (Tri-LB)]
·      Surajbhan Synthetics (P) Ltd Vs. CCE [2014 (301) ELT 386]
submitted that as per the provisions of Section 11BB of the Excise Act, the interest payment is due after a period of three months from the date of Refund application till the payment of Refund. There is no clause under Section 11BB of the Excise Act providing that the date of payment of interest gets postponed by any order of the Court.
On the other hand, the Revenue argued that as per Explanation to Section 11BB of the Excise Act, the Order passed by the Hon’ble CESTAT, Ahmedabad will be deemed to be an Order passed under Section 11B(2) of the Excise Act and since Refunds of the Appellant were decided within 3 months from the date of the Hon’ble CESTAT's Order, no interest is payable.
The Hon’ble CESTAT, Ahmedabad relying upon the decision in the Ranbaxy Laboratory case held that under Section 11BB of the Excise Act, there is no provisionthat relevant date for determining the rate of interest will be postponed in any eventuality. As per these provisions, interest payment accrues from the expiry of 3 months from the date of Refund application made under Section 11B(1) of the Excise Act. Thus, the Appellant is rightly entitled for interest on delayed Refund from the date of filing of refund applications till the date of payment.
Our Comments:
Recently, in the case of Vodafone (I) Ltd. Vs. Commissioner of Service Tax, Mumbai-I [2014-TIOL-2263- CESTAT-MUM], Hon’ble CESTAT, Ahmedabad held that the Authorities have to take expeditious steps to sanction the Refund claim keeping in mind that the interest is to be paid from the kitty of the general public. The Hon’ble Tribunal further ordered that the copy of the Order be sent to the Chairman, CBEC, Secretary (Rev), the Ministry of Finance and the Hon'ble Finance Minister for necessary consideration.
Bimal Jain 
FCA, FCS, LLB, B.Com (Hons)