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In the issue CENVAT Service tax

VAT/Entry tax/Sales tax Contacts

Indirect tax newsletter

In the issue CENVAT Case law Manufacture

• Process of cutting and slitting the jumbo rolls into small different sizes does not amount to manufacture Valuation

• Installation and commissioning charges cannot be charged to excise duty when service tax paid on such value

CENVAT/MODVAT

• Demand of 10% of the sale price is not sustainable on clearance of exempted by-product/ waste

Service tax

Notifications and Circulars

• The Central Government has issued detailed guidelines as to conditions and procedure to exercise the power to arrest, and post-arrest formalities in relation to cognizable offences.

Case law

• Marketing and sales support services in India to group companies outside India qualify as export of services

• Marriage is a social, not religious function

VAT

• Residuary rate of VAT increased in Assam

• Amnesty scheme introduced in Karnataka

• Penalties in respect of certain contraventions enhanced in Delhi

• Turnover limit for furnishing VAT audit report enhanced in Punjab

• e-filing of returns made mandatory in Odisha

Sales tax

• No entry tax exemption on diesel used to generate electrical energy used in manufacture of cement

• “Slice” is liable to sales tax as beverages and not as food article in Delhi

September 2013, Volume 16 Issue 6

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In the issue CENVAT Service tax

CENVAT Case law Manufacture

• In CCE v Asmaco Industries Ltd (2013- TIOL-1148-CESTAT-MUM), the Mumbai Tribunal held that the process of cutting and slitting jumbo rolls into small different sizes did not amount to manufacture.

Valuation

• In Ericsson India Pvt Ltd v CCE (2013 (294) ELT 599), the Delhi Tribunal held that installation and

commissioning charges of internet node paid to BSNL cannot be added to the assessable value of the goods when the appellant had already discharged service tax liability on the amount.

• In Kunal Enterprises v CCE (2013 (294) ELT 613), the Ahmedabad

Tribunal held that when the goods were sold at factory gate, any amount

collected separately as freight in the invoice could not be included in the assessable value even if certain

amounts had been collected in excess of actual transportation cost.

• In Laxmi Udyog v CCE (2013 (294) ELT 437), the Delhi Tribunal held that forwarding charges collected at 1% of the value of goods on equalised basis

was nothing but freight charges, and the same was not includible in

assessable value in the absence of any allegation that such forwarding charges realised from buyer was higher than the actual transportation expenses.

CENVAT/MODVAT

• In Union of India v Hindustan Zinc Ltd (2013 (294) ELT 378), the Rajasthan High Court held that CENVAT credit on short receipt of input to the extent of 0.05% could not be denied when there was no evidence that the assessee had diverted the duty-paid inputs with the intent to evade duty.

• In CCE v Tata Motors Ltd (2013 (294) ELT 394), the Jharkhand High Court held that CENVAT credit could not be denied on the ground of non-payment of duty by the input supplier inasmuch as buyer of inputs was not expected to verify the accounts of the supplier or to find out from department whether duty has actually been paid on inputs.

• In ITC Ltd v CCE (2013-TIOL-1228- CESTAT-MAD), the Chennai Tribunal held that ‘sludge’ obtained during the manufacture of paper/paper board was in the nature of by-product or waste and demand of amount of 10% of the value of sludge under rule 6(3) was not sustainable in law.

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In the issue CENVAT Service tax

• In CCE v Jindal Steel & Power Ltd (2013-TIOL-1100-CESTAT-DEL), the Delhi Tribunal held that CENVAT credit on capital goods used for generation of electricity could not be denied on the ground that excess electricity generated was sold to the State Electricity Board.

• In Hydro S&S Industries Ltd v CCE (2013-TIOL-1089-CESTAT-MAD), the Chennai Tribunal held that service tax paid on outward freight was eligible for CENVAT credit when freight charges were included in the assessable value of excisable goods.

• In Precision Wires India Ltd v CCE (2013 (198) ECR 413), the Ahmedabad Tribunal held that CENVAT credit was admissible on invoices issued by Input Service Distributor prior to registration when there was no dispute about the eligibility of credit.

• In Bajaj Hindustan Ltd v CCE (2013 (294) ELT 590), the Delhi Tribunal held that CENVAT credit on steel items used for fabrication of pollution control equipment could not be denied on the ground that the equipment was embedded in the earth.

Others

• In CCE v Guarniflon India Pvt Ltd (2013 (293) ELT 703), the Ahmedabad

Tribunal held that penalty under Section 11AC could not be imposed when CENVAT credit was wrongly availed, but reversed suo moto with interest after it was pointed out by the assessee’s internal auditors.

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In the issue CENVAT Service tax

Service tax

Notifications and circulars

• The Central Government has exempted the National Skill Development

Corporation (NSDC) and its approved council/agencies/training from payment of service tax on various skill development programs/courses etc offered by NSDC.

(Notification No. 13/2013-ST dated 10 Sep, 2013)

• The Central Government has granted an ad hoc exemption from payment of service tax on services by way of accommodation in a hotel/inn/guest house/ club/ campsite and serving of food and beverages by hotels, guest houses, restaurants etc in the state of Uttarakhand for the period from 17 Sep, 2013 to 31 Mar, 2014.

(Service tax Order No. 1/1/2013 dated 17 Sep, 2013)

• The Central Government has issued detailed guidelines as to imperative conditions and procedure to be

followed when exercising the power to arrest and post-arrest formalities in relation to cognizable offences under the Finance Act, 1994.

(Circular No. 171/6 /2013-ST dated 17 Sep, 2013)

• The Central Board of Excise and Customs has clarified that certain

‘auxiliary educational services’ like hostels, housekeeping, security

services, etc. provided to an educational institution would be exempt from levy of service tax.

(Circular No. 172/7/2013-ST dated 19 Sep, 2013)

Case laws

• The Authority for Advance Ruling (AAR), on an application by Tandus Flooring India Pvt Ltd (2013-TIOL-03- ARA-ST), has held that the marketing and sales support services in India provided by the applicant to its group companies located outside India, for which consideration was to be received in foreign exchange, would qualify as export of services under rule 6A of the Service tax Rules, 1994.

• In Global Transgene Ltd v CCECST (2013-TIOL-1259-CESTAT-MUM), the Mumbai Tribunal held that where no representational rights are granted by licence owner to the sub-licensee and the sub-licensee manufactures and sells the product under its own name, it cannot be held liable to service tax under ‘franchise services’ merely because the product package carries a reference to the patented technology used to manufacture the product.

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In the issue CENVAT Service tax

In a franchisee transaction, it was essential for the franchisee to lose its own identity and solely represent the identity of franchisor.

• The Mumbai Tribunal, in Laxmi Tyres v CCE (2013-TIOL-1261-CESTAT-MUM) held that in a tyre re-treading service contract, value of material cannot be deducted from the gross amount charged merely on the basis of an arbitrary estimate. To claim the deduction of material value transferred/sold while rendering services under service tax Notification No. 12/2003, the amount pertaining to goods supplied needed to be

substantiated on actuals and not on estimates.

• In Delhi Public School Society v CST (2013-TIOL-1282-CESTAT-DEL), the Delhi Tribunal held that though the schools had been established pursuant to an agreement between the appellant and other parties, the appellant had no right to share profit or losses arising out of the school. Accordingly, it could not be held to be a partnership or Joint Venture agreement. Since the appellant had allowed other parties to use the logo and motto of ‘Delhi Public School’ for a consideration, the appellant was liable to pay service tax under ‘franchisee services’.

• The Delhi Tribunal, in Bhayana Builders (P) Ltd and Ors v CST, (2013- TIOL- 1331-CESTAT-DEL-LB), held that goods and materials supplied free of cost by a service recipient to the provider of a taxable construction service will not form part of the gross amount for the purpose of levy of service tax.

• The Mumbai Tribunal, in CCE v Central Panchayat, Kolhapure (2013- TIOL- 1351-CESTAT-MUM), held that marriage was a social function and mode of conducting marriage either by following religious rituals or otherwise did not make it a religious function.

Accordingly, service tax was payable on the ‘mandap keeper services’ in relation to marriages.

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In the issue CENVAT Service tax

VAT/Entry tax/Sales tax Contacts

VAT

Notifications and circulars Assam

• Effective 12 September, 2013, the residuary rate of VAT has been

increased from 13.50% to 14.50%. The rate of VAT in respect of works contract transactions has also been increased from 13.50% to 14.50%.

(Notification No. FTX.55/2005/Pt/197 dated 12 September, 2013)

Andhra Pradesh

• Effective 1 December, 2013, usage of electronic waybills has been made mandatory for all VAT dealers.

(Circular No CCT’s Ref. No. CS (1)/39/

2013 dated 6 September, 2013) Delhi

• Effective 12 September, 2013 excess input tax credit or inadvertent excess payment of tax cannot be carried forward to the subsequent financial year.

• Following penalty provisions have been amended effective 12 September, 2013:

S.

No. Particulars Penalty provision before amendment

Amended penalty provision

1 Failure to apply for amendment in registration

INR 100 per day restricted to a maximum of INR 5,000

2 Failure to apply for cancellation/surrender of registration

INR 1,000 per day restricted to a maximum of INR 25,000

3 Failure to file return or supporting annexure(s)

4 Residual penalty None INR 10,000

(The Delhi Value Added Tax (Amendment) Act, 2013)

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• Online issuance of statutory forms made mandatory for the FY 2011-12 and earlier years.

(Circular No. 13 dated 23 August, 2013)

• The due date for online filing of Annexure 2C and 2D forming part of the return for the quarter ended 30 June, 2013 has been extended to 7 October 2013. The hard copy of the same is required to be submitted by 10 October, 2013.

(Circular No. 14 dated 6 September, 2013)

• The requirement of uploading details of inventory as on 31 March, 2013 in Form Stock 1 has been withdrawn.

(Notification No.F.7(433)/Policy- II/VAT/2012/PF/817-828 dated 23 September, 2013)

• The due date for the submission of online information in Form DP-1 has been extended to 16 October 2013 for all the dealers.

(Notification No.F.3(352)/Policy/VAT/

2013/751-762 dated 9 September, 2013)

Karnataka

• An amnesty scheme in the name of

“Karasamdhana Scheme 2013” has

been introduced wherein partial waiver of penalty and interest levied under the Karnataka Sales Tax Act, 1957 and the CST Act, 1956 will be granted, subject to conditions and restrictions as prescribed under the scheme.

(Notification No G.O. No. FD 184 CSL 2013 dated 2 September, 2013) Odisha

• Effective 1 October, 2013, electronic filing of periodical returns has been made mandatory for all dealers.

(Notification No. III (I)122/18837/CT dated 5 September, 2013)

Punjab

• The turnover limit for furnishing VAT audit report has been increased from INR 5 Mn to INR 10 Mn.

(Notification dated 13 September, 2013)

Uttarakhand

• Effective 14 August, 2013, a schedule prescribing the deemed deduction towards labour and service charges in respect of works contracts has been introduced.

(Notification No. 936/2013/14(120)/

XXVII(8)/2006 dated 14 August, 2013)

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Sales tax Case laws

• The Karnataka High Court, in State of Karnataka v Madras Cements Ltd (2013-63-VST-454-Karn), held that diesel and furnace oil brought into the local area for generation of electrical energy which was used in manufacture of cement could not be treated as raw material used in manufacture of cement. Therefore, the dealer was not eligible for exemption from entry tax applicable for import of raw material used in manufacture of goods for sale.

• The Haryana Excise and Taxation Commissioner has clarified in Redington India Ltd (Memo No

1807/ST-1 dated 22 August, 2013), that in case of software licensing

arrangement, VAT is applicable on the gross consideration after including service tax component.

• The Gauhati High Court, in Rajnikant

& Brothers v The State of Assam (2013- 63-VST-461-GAU), has applied the common parlance test to determine the classification of milk powder sold by the dealer which contains fat and sugar under the entry of ‘skimmed milk powder’. The Court observed that in common parlance, skimmed milk powder means milk powder that has less fat. The milk powder sold by the

dealer contained added fat; therefore, the same could not be classified as skimmed milk powder merely because the dealer has used the label, ‘skimmed milk powder’.

• The Delhi High Court, in Varun Beverages Ltd v Commissioner of VAT (2013-62-VST-388-Del), applied the common parlance test to determine the classification of pulp based drink ‘Slice’

under the entry description of ‘food article’. The Court observed that ‘Slice’

could not be classified as a food article for levy of sales tax merely because the same was treated as food article under the Prevention of Food Adulteration Act (‘POFA’) as there was no reference under the Delhi Sales Tax Act to the definition given under the POFA. The objectives of both enactments were different, and therefore by application of common parlance test, ‘Slice’ was classified as ‘beverages’ and not as ‘food article’.

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VAT/Entry tax/Sales tax Contacts

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Contacts Delhi

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