Staying Updated

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In the issue CENVAT Service tax

VAT/Entry tax/Sales tax Contacts

Staying Updated

Indirect tax newsletter

In the issue CENVAT Case law Manufacture

• Process of printing and varnish/

plastic coating of plain cartons does not amount to manufacture

CENVAT/MODVAT

• CENVAT credit admissible on paint and building materials used for making the production hall as dust free and fire retardant

• Steel structural items used in the manufacture of fixed support on which overhead travelling crane is placed is not eligible for credit

• CENVAT credit admissible on inputs & capital goods used in captive mines

Service tax

Notifications and Circulars

• The CBEC has clarified various emerging issues post-introduction of the STVCES

Case law

• Leasing of premises to a hotel is not a temporary occupation, cannot be held liable to service tax as „Mandap keeper services‟

• The term „railways‟ used in section 65(25b) do not differentiate between metro rail or monorail or any other kind of rail

VAT

• Requirement of complying with Form T-2 in Delhi kept in abeyance

• Electronic payment of tax made mandatory in Karnataka

Sales tax

• Decision of advance ruling authority is binding upon the applicant and all other non-applicant dealers dealing in such goods

• Input tax credit cannot be denied merely on technical violation of not mentioning VAT separately on the invoice

August 2013, Volume 16 Issue 5

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In the issue CENVAT Service tax

CENVAT Case law Manufacture

• In HBD Packaging Pvt Ltd v CCE (2013-TIOL-985-CESTAT-DEL), the Delhi Tribunal held that the process of printing and varnish/plastic coating of plain cartons does not amount to manufacture and as such no duty is payable on same.

Valuation

• In Eastern Bakeries Pvt Ltd v CCE (2013 (293) ELT 593), the Kolkata Tribunal held based on facts that merely because the entire production is sold to one buyer after affixing their brand name, and the fact that the buyer agreed to purchase from the assessee, subject to its specification of quality, quantity and packing, inspection and approval prior to delivery, etc., the assessee and the buyer cannot be said to be related persons, since they do not have any interest in each other‟s business. One-sided interest is not enough.

• In Prem Cables Pvt Ltd v CCE (2013 (294) ELT 254), the Delhi Tribunal held based on facts that the cost of transport from place of removal to the buyer‟s premises is not includible in assessable value in absence of any

evidence that price of goods is being collected in the guise of cost of transportation.

• In Sukalp Agencies v CCE (2013-TIOL- 863-CESTAT-DEL), the Delhi Tribunal held that installation & commissioning charges was includible in assessable value of the excisable goods since there was no material to show separability of clearance of excisable goods from installation and testing charges activity by divisible contract.

CENVAT/MODVAT

• In CCE v Samtel Color Ltd (2013 (293) ELT 501), the Allahabad High Court held that paint and building materials used for making the production hall dust-free and fire-retarding are eligible for CENVAT credit inasmuch as the definition of manufacture under section 2(f) not only includes materials used in the final product but also incidental and ancillary requirements for completion of the final product.

• In CCE v Nalvetha Cast Steels P Ltd (2013 (294) ELT 127), the Chennai Tribunal held CENVAT credit is not admissible on steel structural items used in the manufacture of fixed support on which overhead travelling crane is placed as such support

structure cannot be considered as part or component of the machinery.

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In the issue CENVAT Service tax

• In Tata Steel Ltd v CCE (2013 (294) ELT 121), the Kolkata Tribunal held that CENVAT credit is admissible on inputs & capital goods used in captive mines as per Apex Court decisions in case of Vikram Cement (2006 (197) ELT 145).

• In J V Strips Ltd v CCE (2013 (294) ELT 33), the Delhi Tribunal held that CENVAT credit cannot be denied on marginal difference (0.39%) in weight of inputs when admittedly total excise duty has been paid by the

manufacturer-supplier on full weight of inputs.

• In Calibre Chemicals Pvt Ltd v CCE (2013-TIOL-843-CESTAT-AHM), the Ahmedabad Tribunal held that CENVAT credit is admissible on invoices addressed to head office when there is no dispute about the fact that services were actually received in the factory and the service provider has paid appropriate service tax.

• In Sanghi Industries Ltd v CCE (2013 (294) ELT 303), the Ahmedabad Tribunal held that 100% credit availed on capital goods in first year instead of 50% tantamounts to availment of credit in advance. Demand for reversal of credit cannot be upheld in such a case as the balance 50% credit would be admissible in the next year. Thus, the

appellant is liable to pay only interest on such premature availment of CENVAT credit.

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In the issue CENVAT Service tax

Service tax

Notifications and circulars

• The Central Board of Excise and Customs (CBEC) has clarified various emerging issues post introduction of the Service Tax Voluntary Compliance Encouragement Scheme (STVCES). The CBEC has also issued an FAQ booklet to address the apprehensions of the

stakeholders with respect to the STVCES.

(Circular No. 170/5 /2013-ST and VCES FAQ booklet both dated August 8, 2013) Case laws

• In Amrit Sanjivni Sugarcane Transport Co Pvt Ltd v CCE (2013-TIOL-1097- CESTAT-MUM) and Samarth Sewabhavi Trust v CCE (2013-TIOL- 1129-CESTAT-MUM), the Mumbai Tribunal held the activity of cutting/

harvesting of sugarcane and transporting the same to the sugar factory of the owner of the sugarcane under the supervision of the service provider cannot be classified as manpower supply services. However, the same can be held liable to tax under

„Business auxiliary service‟ category.

• The Delhi Tribunal, in Rajasthan State Beverage Corpn Ltd v CCE (2013-TIOL- 1110-CESTAT-DEL), held that services in relation to marketing and sale of liquor produced/ belonging to the

distilleries would be liable to tax under the category of „Business auxiliary service‟.

• In Actor prepares v CST (2013-TIOL- 1150-CESTAT-MUM), the Mumbai Tribunal held that the amended definition of „Vocational training institute‟ introduced by service tax Notification No. 3/2010 issued on 27 February, 2010 could be applied with retrospective effect. Accordingly, for the period prior to 27 February, 2010 the definition as provided under service tax Notification No. 24/2004 dated 10 September, 2004 would prevail.

• The Mumbai Tribunal, in Acharya Jialal Vasan Sangeet Niketan v CCE (2013- TIOL-1175-CESTAT-MUM), held that

„Mandap keeper‟ means a person who allows temporary occupation of Mandap for a consideration. Leasing of premises to a hotel is not temporary occupation.

Therefore, it cannot be held liable to service tax as „Mandap keeper services‟.

• The Mumbai Tribunal, in Vidarbha Iron

& Steel Corporation Ltd v CCE (2013- TIOL-1182-CESTAT-MUM), held that mere leasing of land, building and plant and machinery without an option to transfer the ownership of the assets at the expiry of the lease term do not merit classification under “Banking and financial service” for the purpose of levying service tax.

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In the issue CENVAT Service tax

• In Cholamandalam/ General Insurance Co Ltd v CCE&ST (2013-TIOL-1187- CESTAT-MAD), the Mumbai Tribunal held that in cases of cancellation of insurance policies on account of rejection by customers, if the insurer has refunded the premium amount along with service tax by giving credit in the account of intermediaries which reflects as advance deposit, it is

sufficient compliance to claim refund of service tax reversed on such

cancellation.

• In Balmer Lawrie & Co Ltd v CCE (2013-TIOL-1189-CESTAT-MUM), the Mumbai Tribunal held that while rendering cargo handling services, where the transportation charges are recovered on actual basis and shown separately on the invoices, service tax would be leviable only on the cargo handling charges.

• The Delhi Tribunal, in Monsanto Manufacturer Pvt Ltd v CCE (2013- TIOL-1196-CESTAT-DEL), held that while rendering clearing and forwarding (C&F) services in relation to frozen food, storage of frozen foods in cold storage is an inseparable part of C&F services, therefore the cold storage charges should be added in taxable value of the C&F service.

• The Mumbai Tribunal, in Afcons Infrastructure Ltd v CCE (2013- TIOL- 1225-CESTAT-MUM), held that the term „railways‟ used in section 65(25b) does not differentiate between metro rail, monorail or any other kind of rail.

Accordingly, the activity of construction in relation to Delhi Metro rail would also be excluded from the scope of

„Commercial and industrial construction services‟.

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In the issue CENVAT Service tax

VAT/Entry tax/Sales tax Contacts

VAT

Notifications and circulars Delhi

• The requirement of online filing of information of inter-State procurement of goods in form T-2 for dealers having gross turnover exceeding INR 100 Mn has been kept in abeyance till further orders.

(Notification No.F.7 (433)/Policy-II/

VAT/2012/530-541 dated 29 July, 2013)

Gujarat

• Effective 6 August, 2013, sale of all goods (other than motor vehicles, television sets, refrigerators, air- conditioners, cameras, mobile phones and computers) by unit canteens run by the Border Security Force and Central Police Forces in Gujarat to their

members have been exempted from the levy of VAT.

(Notification No. (GHN-12)VAT-2013- S.5(2)(38)-TH dated 6 August, 2013) Himachal Pradesh

• Effective 1 September, 2013, VAT exemption on sales made by canteen store department to serving military personnel and ex-servicemen has been removed and the same has been made taxable at the concessional rate of 5.00%.

(Notification No. EXN- F(1)-7/2012 dated 17 March, 2013)

Karnataka

• Effective 1 September, 2013, electronic payment of tax has been made

mandatory for dealers paying INR 10,000 or more towards tax and other dues.

(Notification No. EG1/CR-4/2012-13 dated 31 July, 2013)

Sales tax Case law

• The Andhra Pradesh High Court, in RAK Ceramics (India) Private Limited v The Assistant Commissioner (2013- VIL-62-AP), held that the decision of the Advance Ruling Authority is binding upon the applicant and other non-applicant dealers who are dealing in the goods or executing transactions in relation to which a clarification was sought. However, the binding effect of the advance ruling shall cease

temporarily, if the dealer at whose instance the ruling was rendered files an appeal against it.

• The Madras High Court, in National Small Industries Corporation Ltd v The State of Tamilnadu (2013-VIL-65- MAD), held that in an inter-State hire purchase transaction, the time of passing of property and place of

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VAT/Entry tax/Sales tax Contacts

delivery of goods is irrelevant.

Consequently, the dealer is eligible to claim the benefit of transit sale on the basis of endorsement of title to the goods while the goods were in transit.

• The Haryana VAT Commissioner has clarified vide Memo No. 693/ST-1 (2013-45-PHT-61-JS) that works contractors who have not opted for composition of tax are not entitled to purchase goods at a concessional rate of tax against form VAT D-1.

• The Punjab VAT Tribunal, in 21st Century Builders and Engineers v State of Punjab (2013-45-PHT-503-PVT), held that input tax credit cannot be denied merely on a technical violation that VAT has not been separately charged on the invoices.

• The Himachal Pradesh Tax Tribunal, in Agro Industrial Packaging India Ltd v Additional Excise & Taxation

Commissioner (2013-45-PHT-447- HPTT), has held that sale of old and discarded machinery falls within the ambit of business as an act incidental and ancillary to trade, commerce, manufacture, adventure or concern and hence shall be liable to VAT/CST depending upon the nature of the transaction.

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VAT/Entry tax/Sales tax Contacts

For private circulation only

This publication does not constitute professional advice. The information in this publication has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this publication represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this publication. PwCPL neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take.

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