Friday, December 19, 2014

Service Tax on Commission Agent Service on Import-Export of Goods


In order to promote the Exports, Government of India has given big relief to industries in India, by exempting the service tax on commission paid to overseas agent for Export of Goods vide Notification No 14/2014 ST dated 11th July 2014. It was welcome and much needed move, considering global completion. 

Earlier exemption was there on Commission paid to overseas agent for Export of Goods but it was conditional and upto prescribed limited. But now from 1st October 2014, it is out of purview of service tax.

Commissioner (Appeals) has no option to adjudicate maintainability of appeal when the Hon’ble High Court dismissed the Writ Petition


The Commissioner (Appeals) has no option to adjudicate maintainability of appeal when the Hon’ble High Court dismissed the Writ Petition filed on the ground that alternate remedy is available

We are sharing with you an important judgment of the Hon’ble CESTAT, Andhra Pradesh, in the case of S. V. Rubber Company (P.) Ltd. Vs. Commissioner of Customs, Central Excise & Service Tax (Appeals-II), Hyderabad [(2014) 51 taxmann.com 173 (Andhra Pradesh)] on following issue:

Issue:

Whether the Commissioner (Appeals) has option to adjudicate maintainability of appeal, when the Hon’ble High Court dismissed the Writ Petition filed on the ground that alternate remedy is available?

Facts & background:

S. V. Rubber Company (P.) Ltd. (“the Petitioner”) filed a Writ petition before the Hon’ble High Court of Andhra Pradesh against the Department’s recovery notices issued under Section 11 of the Central Excise Act, 1944 (“the Excise Act”). The Hon’ble High Court vide Order dated October 7, 2013 dismissed the same on the ground that under Section 35 of the Excise Act an efficacious remedy of appeal is provided which can be pursued by any person aggrieved by any decision passed under the Excise Act. Therefore, without exhausting the alternative remedy of appeal provided under the Excise Act, the Petitioner cannot straight away invoke the jurisdiction of High Court under Article 226 of the Constitution of India. 

Accordingly, the Petitioner filed a regular appeal before the Ld. Commissioner. The Ld. Commissioner without deciding the appeal on merit, passed an Order (“Impugned Order”) dismissing the appeal with the finding that no appeal lies against notices issued under Section 11 of the Excise Act since it is not an Order as contemplated under Section 35 of the Excise Act. Being aggrieved, the Petitioner again filed a Writ petition before the Hon’ble High Court of Andhra Pradesh. 

The Petitioner contended that the Impugned Order is contrary to the observations of the Hon’ble High Court and also a gross breach of quasi-judicial discipline. Further, the decision of the Division Bench of the Court which opined that appeal is alternative remedy was not challenged by the Department. Furthermore, the Commissioner being an authority subordinate to the Court within the meaning of Article 227 of the Constitution of India, has not rendered any decision independently at all rather accepted the opinion of the Department and dismissed the appeal holding the same being non-maintainable. 

While, the Department contended that the Commissioner was of the view that statutory provision does not permit such appeal.

Held:

The Hon’ble High Court of Andhra Pradesh allowed the Writ petition and restores the appeal filed by the Petitioner with the direction that the appeal needs to be heard and disposed of within a period of two months from the date of communication of this Order and a compliance report is to be submitted to the Registry concerned after expiry of two months.

Bimal Jain
FCA, FCS, LLB, B.Com (Hons) Flat No. 34B, Ground Floor, Pocket - 1, MayurVihar, Phase - I, 
Delhi – 110091, India  Desktel: +91-11-22757595/ 42427056 Mobile: +91 9810604563

Thursday, December 18, 2014

Mobile phone charger is not a part of mobile phone :Supreme Court


Hon’ble Supreme Court has delivered a landmark verdict in the matter of STATE OF PUNJAB & ORS. v. NOKIA INDIA PVT. LTD. & pronounced that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone.

Brief facts of the case:

The matter pertains to the Punjab VAT Act, 2005 wherein the cellular telephones at allowed to be taxed at a concessional rate. M/s Nokia India Pvt. Ltd. deals in selling of mobile phones and mobile chargers. It paid concessional tax on chargers as well. The Assessing Authority held that the mobile chargers are the accessories, hence full rate of tax was supposed to be levied thereupon. The matter went to appeal. The Deputy Commissioner(Appeals) as well as Tribunal upheld the stand taken by the assessing authority.

However, the P&H High Court took the contradictory view stating that battery charger is a part of the composite package of cell phone.

Aggrieved by the order of High Court, govt. filed an appeal before the Apex Court. 

M/s Nokia contended that charger is an integral part of the cell phone and the cell phone cannot be operated without the charger and when any person comes for cell phone, he purchases the cell phone and then automatically takes away the charger for which no separate money is charged.

Conclusion:

The court held that battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone.

The said verdict may be accessed from the link hereinbelow:


Comment:

It will be a setback for the industry(especially operating in Punjab VAT). It would be interesting to note whether the said interpretation shall be referred to the Constitutional Bench at a later stage or not!

Sumit Grover
Chartered Accountant
+91-9910946323 
[email protected]

Clarifications on Pradhan Mantri Jan Dhan Yojana (PMJDY)


Ministry of Finance Issues Clarifications with Regard to Different Aspects of the Pradhan Mantri Jan Dhan Yojana (PMJDY) Including about Availing of Benefits Under the Yojana 

Various queries or questions have been raised from time to time with regard to different aspects of the Pradhan Mantri Jan Dhan Yojana (PMJDY). The Ministry of Finance has responded to those queries and issued various clarifications in that regard from time to time.

Now the Ministry of Finance has further issued the following clarifications for the benefit of account holders under PMJDY:-

I. Frequently Asked Questions (FAQs) on the Yojana are available on the website www.pmjdy.gov.in.

II. A person who is already having a bank account with any bank NEED NOT to open a separate account under PMJDY. He/she will just have to get issued a RuPay Card in his existing account to get benefit of accidental insurance. Over draft facility can be extended in the existing account if it is being operated satisfactorily.

III. Accidental Insurance coverage under PMJDY

  • o Accidental insurance of Rs.1 lakh is available to all RuPay card holders in the age group of 18-70 where RuPay card need to be used once in 45 days of receipt.
  • o Claim intimation should be given his or her bank where account is maintained within 30 days from the date of accident.
IV. Life Insurance coverage under PMJDY

Basic eligibility conditions:-

  • o Persons opening bank account for the first time, with RuPay card in addition, during the period from 15thAug 2014 to 26th January 2015.
  • o The persons should normally be Head of the family or an earning member of the family and should be in the age group of 18-59.
  • o Account holder need to have valid RuPay card.
  • o The account can be any bank account including a small account.
  • o Only one person in the family will be covered and in case of the person having multiple cards / accounts, the benefit will be allowed only under one card i.e. one person per family will get a single cover of Rs. 30,000/-, subject to eligibility conditions.
  • o The claim of Rs.30,000/- is payable to the nominee(s) of account holder who need to submit necessary documents to the Nodal Branch of the concerned Bank.
  • o Government employees (serving/retired) and their families, persons filing Income Tax Return/TDS deductees and persons covered under the Aam Adami Bima Yojana, are ineligible for Life insurance under PMJDY.

NEW RPU and FVU to be released on 20.12.2014 by TIN-NSDL for ETDS retruns


It is proposed to release new version of NSDL Return Preparation Utility (RPU) and File Validation Utility (FVU) incorporating the below features:

Features of NSDL RPU
·         Allow update in field in Form no. 27Q “Whether TDS rate of TDS is IT act (a) and DTAA (b)” where the tax has been deducted at higher rate.
·         Incorporation section code:
o   “194LBA” & “194DA” have been added for below forms which will be applicable for a statement pertaining to FY 2014-15 & Q3 onwards.
o   Section code 194LBA will be applicable for Form 26Q and 27Q.
o   Section code 194DA will be applicable only for Form 26Q.
o   For section code “194LBA”, select “4BA” from the dropdown of section code column in Annexure I sheet.
o   For section code “194DA”, select “4DA” from the dropdown of section code column in Annexure I sheet.
·         Latest FVU versions incorporating latest validations.

Features of FVU
·         Incorporation section code“194LBA” & “194DA” for Form 26Q
·         The said section codes will be applicable for TDS statement pertaining to FY 2014-15 (Q3 onwards).

Utilities incorporating the above features will be available for download at TIN website (www.tin-nsdl.com) from download section on December 20, 2014.

Wednesday, December 17, 2014

Cenvat credit on ‘Outdoor Catering Services’ eligible for Input Service


Cenvat credit on ‘Outdoor Catering Services’ used in relation to business activities continues to be an eligible Input Service even after amendment in the definition of ‘Input services’w.e.f April 1, 2011
We are sharing with you an important judgment of the Hon’ble CESTAT, Mumbai, in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. Commissioner of Central Excise, Nashik [Order No: A/1479 – 1480/14/SMB/C- IV]on following issue:
Issue:
Whether Cenvat credit on Outdoor Catering services, used in relation to business activities is eligible after amendment in the definition of ‘Input services’w.e.f April 1, 2011?
Facts & background:
In the instant case, Hindustan Coca Cola Beverages Pvt. Ltd. (“the Appellant”) availed Cenvat credit on Outdoor Catering services for the period December, 2011 to December, 2012, which was denied by the Lower Authorities and the Ld. Commissioner (Appeals) on the ground that the definition of Input services given under Rule 2(l) of the Cenvat Credit Rules, 2004 (“the Credit Rules”) has been amended w.e.f April 1, 2011 to specifically exclude any Input service used for personal use or consumption by any employee.
Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai, and relying upon Circular D.O.F No. 334/3/2011-TRUdated February 28, 2011and Circular No. 943/4/2011-CX dated April 29, 2011, submitted the following:
·      Outdoor Catering service is used by the Appellant in relation to carrying out the business of manufacturing of excisable goods;
·      Cenvat credit has been claimed only to the extent the cost of such expenses are borne by the Appellant and not recovered from the employees;
·      Outdoor Catering services per se is not ineligible Input services but it is not eligible for Cenvat credit only when it is used for personal use or consumption of any employee or a sub-group of employee;
·      Deletion of the word ‘activities relating to business’ from the definition of Input services and adding of specific clauses of inclusion and exclusion is only to make it explicit what was already implicit. Accordingly, all Input services used for business continue to be eligible for Cenvat credit unless excluded specifically.
Held:
The Hon’ble CESTAT, Mumbai observed the following:
·      Rule 2(l) of the Credit Rules specifically uses the words ‘used primarily for personal use or consumption of any employee’, which should be given due effect;
·      Outdoor Catering services is used by the Appellant in relation to their business activities and the same is used by all employees in general;
·      The Government while issuing the Budget clarification or subsequent Circulars has clarified that what is not eligible is the Input services meant for personal use or consumption of any employee or the cost of which is included as part of salary of the employee as a cost to Company basis;
Therefore, on the basis of above, the Hon’ble Tribunal held that since in the instant case, Outdoor Catering services are used by the Appellant in relation to their business activities, cost of which is borne by the Appellant and not by the employees, they are rightly entitled to claim Cenvat credit of the same.
Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Flat No. 34B, Ground Floor, Pocket - 1, MayurVihar, Phase - I,Delhi – 110091, India
Desktel: +91-11-22757595/ 42427056 Mobile: +91 9810604563

Download free E book Compendium of service tax law By KPMG


Service tax is a complex subject and is rapidly evolving. The service tax law is amended almost every year by bringing different services under the service tax net, with existing services crossing 100 mark. Further, various sets of rules dealing with credit mechanism, exports, imports, valuation, etc issued from time to time necessitating a comprehensive compilation of service tax. Therefore it is indeed a great effort to compile all the relevant facets of the service tax legislation comprehensively. A publication of such nature providing a quick reference to service tax legislation will be of great help to all the concerned.

This Book Contains
  1. Service Tax act
  2. Service Tax rules
  3. Key provisions of service tax at a glance
  4. Cenvat credit rules
  5. Place of provision of service rules
  6. Service Tax determination of value rules
  7. Point of taxation rules
  8. VCES
  9. Effective rate of tax
  10. Services Codes
  11. Mega exemption
  12. Reverse charge Mechanism

CBDT notifies limit of 50% Govt. grant for deeming university/hospitals as substantially funded by Govt.


NOTIFICATION
INCOME-TAX
New Delhi, the 12th December, 2014

S.O. 3168 (E). – In exercise of the powers conferred by section 295 read with sub-clauses (iiiab) and
(iiiac) of clause (23C) of section 10of the Income-tax Act, 1961 (43 of 1961), the Central Board of
Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (13th Amendment) Rules, 2014.
(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962, after rule 2BBA the following rule shall be inserted, namely:-

“ 2BBB.Percentage of Government Grant for considering university, hospital etc. as
substantially financed by the Government for the purposes of clause (23C) of section 10.

For the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C)of section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty percent. of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.”.

[Notification No.79 /2014/F.No.142/12/2014-TPL]

(Ashish Kumar)
Director (Tax Policy and Legislation)
Note. - The principal rules were published in the Gazette of India vide notification number S.O. 969 (E) dated the 26th March, 1962 and was last amended by the Income- tax Rules, vide notification S.O. No.3015 dated 28th November, 2014. 

Tuesday, December 16, 2014

Benefit of Abatement is available in respect of Interior Works on existing buildings


Recently, the Mumbai CESTAT in the case of The Carpenters v Commissioner of C.Ex & ST, Pune-III/Mumbai-III 2014 (36) STR 1137 (Tri-Mumbai) has held that activities undertaken on existing building which is in already in use, the same would amount to renovation or restoration or alteration or repair as per the definition under Section 65(25b) of the Finance Act, 1994.

In the present case, the Appellant is engaged in activities of interior work such as plastering of walls, tiling of floors, carpentry work, partition work, work relating to bathrooms/toilets etc. and it was question for decision whether the activities undertaken by the Appellant would fall under clause (d) of Section 65 (25b) of the Finance Act, 1994 as claimed by the Appellant of would fall under the clause (c) of the said Section 65 (25b) of the Finance Act, 1994 as claimed by the Revenue.

Clause (c) and (d) of Section 65(25b) is reproduced below:-

“Commercial or Industrial Construction” means:
(c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic application or fittings and other similar services, in relation to building or civil structure; or
(d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is-
i. used, or to be used, primarily for; or
ii. occupied, or to be occupied, primarily with; or
iii. engaged, or to be engaged, primarily in,
commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, rail-ways, transport terminals, bridges, tunnels and dams.

It was observed by the Hon’ble CESTAT that activities of repair, alteration, renovation or restoration undertaken by the Appellant comes under clause (d) and not under clause (c) and, therefore, the Appellant is eligible for the benefit of Notification No. 1/2006-ST and to attract clause (c) the same has to be undertaken in respect of new or unfinished building.

Further it was also observed, that if the contract were entered into prior to 1 June 2007, they would be governed by the provisions of Section 65(25b) of the Finance Act, 1994 relating to ‘Commercial or Industrial Construction Service’. Whereas, if the contract were entered into on or after 1 June 2007, then in that case they would be covered under the provision of ‘Work Contract Service’.

Atul Kumar Gupta
B Com (Hons) FCA, FCMA, MIMA, CIQA, PGDEMM
Central Council Member of ICAI (2013-16)
Former Chairman NIRC of Institute of Chartered Accountants of India
Former Chairman NIRC of Institute of Cost Accountants of India
Author of “An Introduction to Service Tax” & “Comprehensive Guide to Service Tax”

Sunday, December 14, 2014

Deduction u/s 80CCD for CPF /NPS upper Limit One Lakh only ?


Section 80CCD(1) allows an employee, being an individual employed by the Central Government  on or after 01.01.2004, or by any other employer ,or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 (National Pension System –NPS) or as may be notifed by the Central Government.

In Finance Act, 2014 ,Finance Minister has increased the Overall Saving Limit for Section 80C,80CCC and 80CCD(1) from Rs 1,00,000/- earlier to Rs 1,50,000/-  wef  financial year 2014-15. But many of you may not aware of that the upper limit of Rs 1,50,000/- is not available for contribution made by employee /Self employed in Contributory pension Scheme(CPF) /National Pension scheme(NPS) u/s 80CCD for financial year 2014-15 onwards.

In Finance Act,2014,an internal limit of Rs 1,00,000/- has been fixed u/s 80CCD(1).So Central/State Government or any other employee contributing to the NPS/CPF can claim maximum deduction of Rs 1,00,000/- for financial year 2014-15 onwards .However such person can claim deduction of Rs 1,50,000/- through other scheme available u/s 80C like PPF ,ELSS,NSC etc.

Tax treatment of the Contribution in NPS/CPF

Tax treatment for Employee 

Employee Contribution :Employee's contribution is eligible for deduction u/s 80CCD(1) subject to maximum 10% of salary (includes Dearness Allowance but excludes all other allowance and perquisites). The deduction under section 80CCD(1) shall not exceed Rs. 1,00,000/-.

Employer's contribution : Contribution by Govt /Employer to New Pension scheme /Contributed Pension scheme is taxable in the hand of Employee as perquisites . Any contribution made by the Central Government or any other employer to the account of the employee under the New Pension Scheme as notified vide Notification F.N. 5/7/2003- ECB&PR, dated 22- 12-2003 referred to in section 80CCD shall also be included in the salary income.

However the contribution made by the Central Government or any other employee to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under section 80CCE.

Judiciary Appointed, Government Disappointed “CA/CMA


Controversial and debated issue of whether board (CBEC) has power to conduct service tax audit of assessee has gone into various folds recently, but now it has got finality.Department has initiated and conducted Service Tax Audit of many assessees. How ever there was no explicit powers given under Finance Act 1994 to conduct the service tax audit by department officials, unlike in case of Central Excise Audit as per Section 37(2)(x) of the Central Excise Act, 1944 to be conducted by Excise Department or Special Audit of Service Tax as per Section 72A of Finance Act 1994 to be conducted by CA/CMA .Hence this issue has put before judiciary to decide the impugned power of department to initiate and conduct the Service Tax Audit. High court wherein said that the issue was under consideration, has stated that department does not have authority to initiate and conduct Service Tax Audit and same is to be carried out as per Section 72A by CA/CMA.

Section 94 of Finance Act 1994 has given power to Central Government to make Rules. Said section was not empowering government to frame the rule to authorize department to conduct service tax audit by departmental officer till 6th August 2014.However Rule 5A of Service Tax Rules 1994 has vested the power to the Commissioner to appoint audit party consisting of departmental officer to conduct verification/scrutiny of records of assesses. Hence judiciary in below mentioned case,decided that Rule 5A of Service Tax Rules 1994 is ultra vires to the provisions of Finance Act 1994 and same is to be quashed away.