Saturday, December 20, 2014

Extended period is not invocable, when penalties were waived off on the ground of interpretational issue being involved


We are sharing with you an important judgment of the Hon’ble CESTAT, New Delhi, in the case of Sankhla Udyog Vs. Commissioner of Central Excise & Service Tax, Jaipur [(2014) 51 taxmann.com 264 (New Delhi - CESTAT)]on following issue:
Issue:
Whether extended period is invocable, when penalties were waived off on the ground of interpretational issue being involved?
Facts & background:
In the instant case, Sankhla Udyog (“the Appellant”) was engaged in rendering Repairs and Maintenance Services. A Show Cause Notice was issued to the Appellant by invoking the extended period alleging that there was a difference between the amount shown in their ledger and in the Service Tax Returns (ST-3) on which the Appellant had not paid Service tax and the same was liable to be recovered along with interest and penalty.
The Appellant contended that prior to June 16, 2005, Repair service other than under a Maintenance contract was not liable to Service tax and thereafter, they became eligible for Small Scale Exemption under the erstwhile Notification No. 6/2005-ST dated March 1, 2005 effective from June 16, 2005.Further, the difference between the figures shown in the ledger and in the ST-3 occurred because in the ledger the figures were shown on accrual basis whereas in ST-3 the figures were shown on actual realization basis and that there had been no suppression or wilfulmis-statement on their part.
However, the Adjudicating Authority confirmed demand on the Appellant by invoking extended period but waived off penalties under Section 80 of the Finance Act, 1994 (“the Finance Act”)on ground that there was interpretation of law involved.
Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Delhi, inter alia, questioning invocation of extended period when penalty was waived off under Section 80 of the Finance Act on the ground of interpretation of law being involved.
Held:
The Hon’ble CESTAT, Delhi held that when benefit of Section 80 of Finance Act has been extended for not imposing any penalty, it clearly shows that the ingredients required for invoking extended period are not present in the instant case. Indeed in the entire
Adjudication Order there is no word as to how the extended period is invocable. Hence, the extended period is not invocable.
It was further held by the Hon’ble Tribunal that once the Appellant explained the reason for mismatch between the figures of their ledger and in their ST-3 return, a clear finding was required to be given by the Adjudicating Authority instead of brushing it aside on the ground that it was not possible to verify their claim.
Hence, the Adjudicating Order was set aside and matter was remanded back to decide the same afresh but without invoking the extended period.

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


Where all the factual facts are available on the records, the Tribunal couldn’t remand back the case


Where all the factual facts are available on the records, the Tribunal couldn’t remand back the case

We are sharing with you an important judgment of the Hon’ble High Court, Bombay, in the case of L'Oreal India (Pvt.) Ltd. Vs. Union of India [(2014) 51 taxmann.com 561 (Bombay)] on following issue:

Issue:

Whether the Tribunal could remand back the case even though all factual facts are available on the records?

Facts & background:

L'Oreal India (Pvt.) Ltd. (“the Petitioner”) was engaged in the manufacture of cosmetic products classified into two categories, namely Technical products cleared to Salon/ Beauty Parlour(“Technical products”) and Retail sale products meant for sale to consumers (“Retail sale products”). The Petitioner was valuing both the products under Section 4A of the Central Excise Act, 1944 (“the Excise Act”), but, the Department argued that Technical products were to be valued as per Section 4 of the Excise Act.

The Adjudicating Authority after considering the reply of the Petitioner dropped the proceedings and held that both the products were to be valued under Section 4A of the Excise Act. Being aggrieved, the Department preferred an appeal before the Hon’ble CESTAT. The Hon’ble CESTAT set aside the Order of the Adjudicating Authority and directed the Adjudicating Authority to pass fresh order on merits regarding valuation of the Technical products and also after considering the issue of limitation. 

Being aggrieved, the Petitioner filed a Writ petition before the Hon’ble High Court of Bombay arguing that since the matter was heard on merits before the Hon’ble Tribunal, the Tribunal should have decided the appeal and not remanded the matter back. 

Held:

The Hon’ble High Court of Bombay relying upon the finding of the Apex Court in the case of M.G. Shahani& Co. (Delhi) Ltd. Vs. Collector of C. Excise [1994 (73) ELT 3] and after observing that the Tribunal had not remanded the matter seeking any additional facts, held as under:

  • If, on materials on record, the Tribunal can analyse evidence and arrive at a factual conclusion, the Tribunal ought not to remand the matter and instead hear the matter and pass order on merits;
  • Though dispute related to valuation of Technical products and the Adjudicating Authority held that both products are liable to be assessed under Section 4A of the Excise Act, the Tribunal should have decided appeal with reference to valuation of Technical products;
  • It was not proper to set aside Adjudication Order and remand the case for fresh adjudication.

Hence, the Hon’ble High Court allowed the Writ petition and the matter was sent back to the Tribunal for disposal on merits.

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


Salient features of Constiution(122nd Amendment) Bill: GST


On 19th Dec'14, Hon'ble Union Finance Minister, Sh. Arun Jaitley presented Constitution(122nd Amendment) Bill,2014 which focused on the introduction of GST in Indian economy. The following is the gist of amendments proposed by this bill: 

  1. Insertion of new article 246A to confer simultaneous power to Union and State legislatures to legislate on GST. 
  2. To do away with the concept of ‘declared goods of special importance’ under the Constitution. 
  3. Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST. 
  4. At the State level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST. 
  5. All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST, though it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period. 
  6. Both Centre and States will simultaneously levy GST across the value chain. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. 
  7. The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States. 
  8. GST will be a destination-based tax. All SGST on the final product will ordinarily accrue to the consuming State. 
  9. Levy of non-vatable additional tax upto 1% on supply of goods in the course of inter-State trade or commerce. for a period not exceeding 2 years.This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods shall be assigned to the States from where such supplies originate. 
The term "services" is proposed to be exhaustively defined as "anything other than goods". 

Copy of the said bill can be accessed from the link herein below: 


Comment: 

Someone, please ask from Hon'ble FM, whether immovable property can be classified as services? It shall enlarge the scope for unnecessary invitation to litigation right from the beginning. Hence, these points should be taken for re-consideration as well to plug the ambiguities from the very first step.

Sumit Grover
Chartered Accountant
+91-9910946323

Salient features of Electricity Act (Proposed Amendments)


The Electricity (Amendment) Bill, 2014 was introduced today in the Lok Sabha by the Minister of State (I/c) for Power, Coal and New& Renewable Energy Shri. Piyush Goyal. The amendments will usher in much needed further reforms in the power sector. It will also promote competition, efficiency in operations and improvement in quality of supply of electricity in the country resulting in capacity addition and ultimate benefit to the consumers. 

Salient features of the proposed amendments

The Electricity Act, 2003 was enacted to amalgamate and modernize the earlier Electricity Laws, namely, the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The Act was reviewed and amended twice, in the year 2004 and 2007, to give effect to certain changes considered necessary.

Based on the experience gained over the years, it was felt to review the provisions further to bring efficiency and competition in the distribution sector, strengthening grid security and safety, promotion of renewable energy, rationalization of tariff and strengthening and performance oversight of Regulatory Commissions etc.

Certain legislative changes were suggested by the Working Group on power for the formulation of 12thFive Year Plan which were further examined under a Committee constituted under Chairperson, CEA. Based on the recommendations of the said Committee, the proposed amendments were uploaded on the website of Ministry of Power in the month of October, 2013. Thereafter, consultations were held with various stakeholders including those from Central Ministries, State Governments, Generation, Transmission, Distribution utilities, Regulatory Commissions, Private Developers, traders, industry associations, consumer groups, power exchanges and individuals etc., in meetings taken in the Ministry.

Based on exhaustive consultations, certain amendments to the Electricity Act, 2003 have been proposed broadly covering the following areas:-



A. Enhancing Grid safety and security: In order to strengthen and enhance Grid safety and security, specific measures regarding maintenance of spinning reserves along with strong and effective deterrence in the form of enhanced penalties for violations of the directions given by the State and Regional Load Despatch Centres etc., have been envisaged.

B. Separation of Carriage & Content in the Distribution sector: To achieve the objectives of efficiency and for giving choice to consumers through competition in different segments of electricity market, concept of multiple supply licensees is proposed by segregating the carriage from content in the distribution sector and determination of tariff based on market principles, while continuing with the carriage (distribution network) as a regulated activity. To protect the interest of consumers, the tariff for retail sale of electricity is proposed to be capped through the Regulator and one of the supply licensees is proposed to be a Government controlled company. Further, the existing distribution licensees are proposed to continue till the expiry of their term as specified in their licence.

C. Promotion of Renewal Energy: In order to accelerate the development of Renewable Energy sources, a number of measures including the provision for a separate National Renewable Energy Policy, development of renewable energy industry, Renewable Generation Obligation on coal and lignite based thermal power plants, specific exemptions to Renewal Energy sources from open access surcharge, separate penal provisions for non-compliance of Renewal Purchase Obligation etc., have been envisaged under the Renewable Generation Obligation for coal and lignite based thermal power plants.

D. Tariff Rationalization: To rationalize the tariff structure on sound financial principles for the viability of the distribution sector and recovery of revenue requirement of licensees without any gap, the provisions of Tariff Policy are proposed to be made mandatory for the determination of tariff. Further, the bill envisages timely filing of tariff petitions by utilities, disposal of the same by the Appropriate Commission within a specified time period and powers to Appropriate Commissions for initiating suo-motu proceedings for determination of tariff in case the Utility/Generating Companies do not file their petitions in time.

E. Miscellaneous : Suitable amendments are also proposed for improving the accountability and transparency in the working of Appropriate Commissions without affecting their functional autonomy; bringing clarity in regard to appointments, functions and powers of the Chief Electrical Inspector/ Electrical Inspectors and levying of fees for electrical inspections; exemption to developer of SEZs, Railways and Metro Rail for obtaining distribution licence; collection and realization of any dues along with the electricity dues, etc.

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