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RECENT judgements

The Assessee, an employee of ONGC was seconded to a Dutch JV company. The assessee stays for 98 days in India during the relevant financial year and claims exemption for income earned on deputation abroad. The AO takes the view that the employee did not leave India for employment outside India rather he has been sent for the work of ONGC out of India and, therefore, his income was chargeable to tax CIT (A) held that he was an employee of ONGC but being a foreign company in Sudan, a separate entity, the assessee can be said to have left India but joined the employment in a foreign country and, therefore, the condition for treating him as resident would be for 180 days as against 60 days provided in the Explanation. In these circumstances, he would not be a resident in India. CIT (A) dismissed AO’s decision, since the assessee in India has stayed for less than 180 days and the salary during the deputation period was paid by the non-resident company and such income was not taxable in India. Held, Revenue’s appeal stands dismissed.

Contributed by CA. Hiten Shah and CA. Hinesh Doshi

SERVICE TAX

CARGO HANDLING SERVICES

On facts, where the appellants were engaged in unloading of coal from railway wagons and discharging the same to the conveyor belt through the track hopper the Tribunal held that the appellant’s activities would be liable for service tax under the category of cargo handling services. [Singh Brothers vs. CCE (2009) 14 STR 552 (Tri-Del.)]

CLEARING AND FORWARDING AGENT

In order for a service to be covered under the category of ‘clearing and forwarding’ services, the service provider must provide both clearing “and” forwarding services and not only clearing “or” forwarding. [CCE v. Kulcip Medicines (P) Ltd. (2009) 14 STR 608 (P&H) overruling Medpro Pharma Pvt. Ltd. v CCE (2006) 3 STR 355 (Tri. – LB)].

COMMERCIAL TRAINING OR COACHING CENTRE SERVICES

Providing training to candidates, sponsored by various insurance companies to appear for examinations conducted by IRDA which are required to be cleared to work as an insurance agent would be considered as a vocational training entitled for exemption from service tax under Notification No. 9/2003 – S.T. [Pasha Educational Training Inst. vs. CCE (2009) 14 STR 481 (Tri-Bang.)]

CONSULTING ENGINEERING SERVICES

Supply of drawings and designs as per the technical requirements of the client which would attract the provisions of the Customs Act, 1962 would amount to sale of goods and not rendering of consulting engineering services. [Solitz Corporation v. CST (2009) 14 STR 642 (Tri- Del.)]

MANAGEMENT CONSULTANCY SERVICES

On facts, the Tribunal held that the appellants by providing on going technical services were engaged in rendering advice, consultancy or technical assistance in the working system of the manufacturing facility of their client and accordingly would be liable for service tax under the category of ‘Management consultancy services’. [Shervani Indus. Syndicate vs. CCE (2009) 14 STR 486 (Tri-Del.)]

The services of deputing personnel to sister concerns to engage in day to day activities is not liable under Management Consultancy services. [Daurala Organics v CCE (2009) 14 STR 620 (Tri. – Del.)]

IMPORT OF SERVICES

The Larger Bench of the Tribunal affirmed its decision in Hindustan Zinc Ltd. vs. CCE (2008) 11 STR 338 (Tri-LB) and held that recipient of services imported would not be liable for service tax prior 1.1.2005. [Molex (India)Lltd vs. CCE(A). (2009) 14 STR 616 (Tri-LB.)]

VALUATION

In case of photography services, the portion of value attributable to sale of photography materials would not be included for the purpose of levy of service tax. [CCE vs. Ajanta Color Labs. (2009) 14 STR 468 (Tri-Del.)]

Handling charges recovered from customers for giving physical delivery of scrips and certificates (a system which prevailed prior to 2001), not being in the nature of commission or brokerage is not includible in the value of taxable services which in terms of Section 67(a) is the aggregate of the commission or brokerage charged by a stock broker on the sale or purchase of securities from the investors and includes the commission or brokerage paid by the stock broker to any sub-broker. [Steel City Securities Ltd. vs. CCE (2009) 14 STR 479 (Tri – Bang.)]

Western India Chartered Accountants Newsletter | July 2009

Note : This decision is as per the law prior to 16.7.2001

Commission received by mandap-keeper from decorators for providing them the client for the purpose of decoration would have to be excluded for the purpose of calculating service tax under the category of mandap keeper services. [Anand Associates vs. CST (2009) 14 STR 504 (Tri-Ahmd.)]

LIMITATION

Where the appellants had registered for service tax since September, 2004 but bona fide believed that their activities would not be liable prior to 16.6.05 and they had also informed the department as far back as in 1998 about their activities the Tribunal held that since the department was made aware of the activities of the appellant in 1998, there was no suppression of facts and hence the larger period of limitation was not invokable. [CST vs. P.J. Margo Pvt. Ltd. (2009) 14 STR 477 (Tri-Bang.)]

Demand - Limitation

Where no objections were raised by the department as regards valuation when the appellant firm filed returns regularly during its existence nor when they surrendered their registration certificate on dissolution of the firm, the Tribunal held that extended period of limitation cannot be invoked to confirm a demand prior to dissolution. [CCE & ST v. P.V. Narayana Reddy (2009) 14 STR 701 (Tri-Bang.).

PENALTY

Where non-payment of service tax was on account of confusion with regard to the liability to pay service tax the Tribunal held that there was a reasonable cause as envisaged u/s. 80 for waiver of penalties. [Life Insurance Corporation of India vs. CCE (2009) 14 STR 495 (Tri-Del.)]

Enhancement of penalty by way of revising the order of adjudicating authority during the pendency of appeal before CCE(A) is not sustainable. [Agarwal Color Lab vs. CCE (2009) 14 STR 547 (Tri-Del.)]

REFUND

Refund of service tax paid under TR-6 challan cannot be denied merely on the ground that the same was not a prescribed document at the relevant point of time especially when the payment of service tax has not been denied; the objection of the revenue pertains more to the form rather than substance.[CCE vs. Nitin Spinners Ltd. (2009) 14 STR 527 (Tri – Del.)]

Where the assessee had self assessed and deposited excess services tax and claimed refund, the rejection of the refund claim by the revenue on the ground that the assessee had not challenged the assessment by filing a statutory appeal is not sustainable since no order capable of being appealed against had ever been passed. [CCE v. Noble Grain India Pvt. Ltd. (2009) 14 STR 617 (Tri. – Mumbai) following the decision of Rajasthan High Court in Central Office Mewar Palace Org. v. Union of India (2008) 12 STR 545 (Raj.)]

EXPORTS – REFUND

The appellant provided services to clients based abroad. It got these clients through its agent in India. The consideration for its services was received first by its agent in foreign currency who after deducting its commission paid the balance to the appellant in INR. The Revenue denied refund of tax paid on inputs used for export of such services on the ground that the appellant had not received the consideration for services exported in convertible foreign exchange directly from service recipient. The Tribunal allowing the appeal of the appellant held –

  • (i)

    The condition for receipt in foreign exchange was not applicable prior to 1.3.07 in respect of services falling under rule 3(3) [i.e. location of service recipient category] and the appellants claim was in respect of services exported prior to 1.3.07 and also in respect of services falling under rule 3(3) [i.e. location of service recipient category].

  • (ii)

    Even if there was condition for receiving the money in foreign exchange–

    • a.

      The appellant would be satisfying such a condition also by liberal interpretation since it is the appellant who have rendered the services directly to the recipient situated abroad and not the agents and the payment has been received in foreign exchange though by their agents.

    • b.

      The receipt of monies by an agent of the appellant in foreign exchange would be deemed to have been received by the appellant in foreign exchange for the purposes of export Rules.

[Nipuna Services Ltd vs. CCE (2009) 14 STR 706 (Tri. – Bang.)] Contributed by CA. A. R. Krishnan & CA. Girish Raman

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