Sale of Study Materials by Coaching Centres would not attract Service Tax: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad bench has observed that the sale of study materials by a registered coaching centre would not attract service tax as the same had already been subjected to VAT.

The appellant, a service provider and engaged in the selling of Healthcare, Lifestyle, Homecare, Personal care products through network marketing, also engaged in the selling of study material on behalf of several companies.

The department noted that the appellants are engaged in providing IT Education through these up-front companies i.e. M/s APLL. Therefore, it was alleged that all the educational services have been provided by the appellant through their companies the study material has been sold by the appellant is nothing lest it is as the gamut of the appellant to avoid payment of service tax on the sale of study material related to IT Education services. Accordingly, they demanded service tax on the amount of sale of study material by the appellant on behalf of the companies under the category of ‘Commercial Coaching or Training Services’ by invoking the extended period of limitation.

The bench noted that the coaching centres are registered coaching centre and provide services to their students. The coaching centres are also private limited companies and having separate identity known by the Registrar of Companies.

“We further take note on the fact that appellant is engaged in only selling of study material to the students of these coaching centres and paying VAT on sale of these study material. Therefore, in the light of the decision of this Tribunal in the case of M/s Chate Coaching Classes Pvt. Ltd. (Supra), the amount collected by the appellant by selling of study material is not taxable service under the Finance Act, 1944. The case of the Revenue is that the coaching centres are up front companies of the appellant is not acceptable that these coaching centres are independently providing coaching services to their students and on the fees collected by them, they are paying service tax. In that circumstances, it cannot be said that these coaching centres or up front companies of the appellant and the appellant is liable to pay service tax on the payment of sale of study material. Therefore, we hold that the whole case of the Revenue is without basis.”

Customs Officers cannot seize Goods in SEZ Area: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal has held that the customs officers have no jurisdiction to seize the goods in the Special Economic Zone ( SEZ ).

The appellants, Shri Imran Ahmed, are located in S.E.Z. area and having a license to import the goods which are to be re-exported after processing. The appellant imported certain brass scrap under the said license.

The DRI came to know that said brass scrap imported by the appellant is not scrap, but is a prime material and therefore, seized the said goods. The adjudication took place wherein the goods were held liable for confiscation. Consequently, the redemption fine and penalties were imposed. Differential duty was also demanded along with interest. Personal penalty on the co-noticees was also imposed.

The bench noted that the appellants are located in Special Economic Zone and having a license to import the impugned goods.

Relying on the decision of the Tribunal in the case of Morgan Tectronics Ltd. v. Commissioner of Customs, New Delhi, the bench held that “the Customs officers have no jurisdiction on the appellant to seize the goods in S.E.Z. area therefore seizure of the goods in question is set aside. Consequently, no demand can be confirmed against the appellants. Therefore, the confiscation of the impugned goods is also set aside.”

Depreciation cannot be disallowed merely on ground that IPR was not used for Manufacturing Activities: Delhi HC [Read Judgment]

A division bench of the Delhi High Court has held that the claim for depreciation under Section 32 of the Income Tax Act, 1961 cannot be disallowed merely on the ground that the intellectual property rights were not used by the assessee for the manufacturing activity.

The assessee had purchased products from Monsanto India Limited and had thereafter sold these products with the acquired and purchased trademarks like Lasso, Machete and Fast Mix. Sales were through chain of dealers and retailers. Trademarks acquired and owned by the assessee were advertised for sale promotions. For the year under consideration, the assessee had claimed depreciation of Rs. 3,44,37,935/- on the said block of assets. The Assessing Officer disallowed the claim on the ground that the capital asset in form of intellectual property rights was not used for manufacturing activities.

On appeal, both the Commissioner of Income Tax (Appeals) and the Tribunal granted relief to the assessee. Aggrieved by the orders, the Revenue approached the High Court.

The division bench comprising Justices Sanjiv Khanna and Chander Sekhar noted that the purchase of intellectual property rights by the assessee, consideration paid, the nature and character of the intellectual property rights etc., are not disputed. The intellectual property rights purchased by the assessee included trademarks>

It was further noted that the respondent-assessee had borne the “Lasso”, “Machete” and “Fast Mix”, rights to reference and use of registration data in support of product registration, benefits of business contracts, business information, business intellectual property right, trademarks and rights against third parties.

“It is an accepted and admitted position that the products sold by the respondent-assessee had borne the trademarks “Lasso”, “Machete” and “Fast Mix”. Substantial advertisement and sales promotion expenditure was incurred. Use of intellectual property rights for sales and marketing was not questioned and commented upon in the assessment order. Depreciation was disallowed as the asset had not been put to use for manufacturing activities. This cannot be a ground and reason to hold that the assessee had not “put to use” the intellectual property rights assets in the year in question. Mere purchase of the products, from third party or the fact that assessee was not engaged in manufacturing activity, would not make any difference,” the bench said.

Parle 2-in-1 Eclairs & Kismi Toffee are not White Chocolates: CESTAT [Read Order]

The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the products namely Parle 2-in-1 Eclairs and Kismi Toffee are not ‘white chocolates’ and can be classified as ‘Boiled Sweets’ for which payment of duty at concessional rate is allowable.

The appellants, Marko Foods and Pahladrai Confectionaries Pvt. Ltd are manufacturing ‘Chocolates’ namely “Parle 2-in-1 Eclairs”, “Kismi Toffee” and “Kismi Toffee Bar.” Respectively. The ingredients of the said manufactured goods are liquid glucose, sugar, milk solids, edible vegetable oil, lecithin, salt and flavor, emulsifier (322).

The appellants claimed that the above products must be classified as ‘Boiled Sweets’. However, the department rejected the contention and classified the same as “White chocolate.” The first appellate authority confirmed the above order.

The Tribunal, after analyzing the test report found that the ingredients of the said goods namely sugar, edible oil and emulsifier etc. concerning of full white colour several matters mainly presence of fat and protein emulsifier etc., each white chocolate preparation which does not necessary positive test of Theobromina (does not confirmed presence of cocoa) having following characters Fat content 8%).

It was noted that as per the chapter 17-HSN explanatory note „white chocolate‟ which means white chocolate composed of Sugar, Cocoa butter, Milk powder and Flavouring agents, but not containing more than mere traces of cocoa (cocoa butter is not regarded as cocoa).

“From the said definition, it is clear that white chocolate should contain “cocoa butter”. As per the test report, it is clear that the sample does not contain any cocoa butter and white chocolate requires fat content of 25% as per the Food Safety & Standards (Food Products Standard & Food Additives) Regulations, 2011 whereas the fat content in the goods in question is 8% only. Therefore, from the test report it can be said that the goods in question are not white chocolate. Therefore, the said item do qualify for exemption as per the Notification No.03/2006-CE dated 01/03/2006 (Sr.No.16), also Notification No.12/2012-CE dated 17/03/2012 (Sr.No.19), which explains that items falling under Chapter 170490 are entitled for exemption under Sugar Confectionary (excluding white chocolate and bubble gum). Admittedly, the goods manufactured by the appellants are Sugar Confectionary is neither chocolate nor bubble gum. Therefore, the appellants are entitled to pay concessional rate of duty as allowed by the above cited Notifications,” the Tribunal said.

Compensation Received for Discontinuing Commodity Trading Business is Taxable: ITAT [Read Order]

The Cochin bench of the Income Tax Appellate Tribunal (ITAT) has held that the compensation received for discontinuing commodity trading business is taxable as a non-competent fee under Section 28(va) of the Income Tax Act, 1961.

While considering a second appeal by the assessee, the bench applied the literal interpretation of section 28(va) of the Income Tax Act and clarified that all payment of compensation for discontinuance of a business activity would be covered under the said provision unless the same was liable to be taxed under the head `capital gains’.

The assessee, M/s.Geojit Investment Services Limited, received Rs. 40 crore for discontinuing its commodity trading business from BNP Paribas. The amount was credited to the profit and loss account of the assessee for the year ending 31.03.2009 and disclosed as an “extraordinary item”. While filing returns, the assessee included the compensation of Rs.40 crore while computing book profit and paid tax thereon as per the provisions of Section 115JB of the Income Tax Act. For the purpose of computing tax under normal provisions of the Act, the assessee excluded the said compensation as not liable to tax. The Assessing Officer held that the amount is taxable by holding that the assessee’s source of income/profit earning apparatus was not impaired since a new company under the same group `Geojit’ was incorporated by common promoters and in essence there was no loss of profit-making apparatus or source of income.

The AO further made an alternative view that even it is assumed that the profit-making apparatus of the assessee was impaired, the compensation received by the assessee was taxable in terms of the provisions of section 28(va) of the Act.

The first appellate authority, confirmed the order and held that the compensation received by the assessee was taxable u/s 28(ii)(c) of the Income Tax Act.

On appeal, the assessee contended that the compensation received was capital receipts for loss of source of income / profit earning apparatus and hence not liable to tax.

Upholding the orders of the lower authority, the bench concluded that the compensation was received for not carrying on any activities in relation to its commodity trading business.

The bench said that “the compensation so paid for not carrying any activity in relation to any business (commodity trading business) would be taxable going by the plain meaning of section 28(va)(a) of the Act. Section 28(va) of the I.T.Act was introduced w.e.f. 01.04.2003. Though there was no written agreement for payment of compensation, the letters of BNP Paribas dated 23.05.2008 and 27.05.2008 and the Board Resolution of the assessee-company stating that it would discontinue the commodity trading business of the assessee on receipt of compensation of Rs.40 crore, would come within the ambit of an arrangement / undertaking / action in concert, whether or not, the same was formal or in writing or it was intended to be enforceable by legal proceedings and that would tantamount to an agreement for the purpose of section 28(va) of the I.T.Act. The wordings of section 28(va) of the Income Tax Act is unambiguous and clear. The said section does not restrict, the bringing to tax only the non-compete fee but any sum that was received or receivable in cash or kind for not carrying out any activity in relation to any business.”

Photography Services rendered for Preparing Voters ID Card not subject to Service Tax: Calcutta HC [Read Judgment]

The Calcutta High Court has held that the photography services done by the agency while preparing Electoral Photo Identity Card (EPIC) would not be subject to service tax under Section 65(105)(3b) of the Finance Act, 1994.

The petitioner, M/s. Webel Technology Ltd was awarded two contracts for preparation of Electoral Photo Identity Card (EPIC). The department demanded service tax from the petitioner by holding that the preparation of EPIC includes taking of photographs of voters by Digital Camera, processing, lamination and, therefore, such authority comes within the purview of photography service.

Before the High Court, the petitioner contended that photography is one of the several activities which a person has to undertake in order to produce an EPIC. The differential rates mentioned in the letter dated January 22, 2007 of the State of West Bengal would establish that, the value of taking photograph is about of 5.5% of the price of the complete EPIC. It was contended that the petitioner is not a photography studio or agency within the meaning of Section 65(105)(3b) of the Finance Act.

The bench noted that the subject contracts cannot be said to limit itself to photography and the preparation of a photograph or photography is not the sole purpose of the contracts.

The Court said that “the end product is EPIC. Such end product involves a photograph of a voter. The photograph of the voter incorporated in EPIC is not a standalone product. To my understanding, the contract for EPIC cannot be divided into separate compartments to say that, photography or photograph is a separate compartment. It is indivisible. Therefore, on the strength of Larsen & Toubro Ltd. (supra) such contracts cannot be divided to bring it under the Service Tax net assuming that, the petitioner was rendering the service of photography. In any event, as noted above, the contracts in question are for preparation of EPIC. The petitioner cannot be said to have rendered any photographic services to an individual or to the person who had entered into the contract with the petitioner.”

It was therefore, concluded that since the petitioner not having rendered any service of photography is not liable to pay Service Tax, the impugned show-cause notice is, therefore, without any jurisdiction.

ICAI seeks to defer Implementation of Revised Form 3CD [Read Letter]

The Institute of Chartered Accountants of India ( ICAI ) had requested the Central Government to postpone the newly revised Form 3CD in the next Financial year i.e., 2019-20.

Tax Auditors of a certain class of Assessees shall file Form 3CD in the prescribed format. Presently, the companies that are not subjected to tax audits are required to furnish GST details.

The Central Government, on 20th July, has revised Form No. 3CD and extended the scope of tax audit cases.

Form 3CD is a Form in accordance with Rule 6G(2) and Section 44AB of the Indian Income Tax Act, 1961. The Form is a part of the process of filing Income Tax Returns in India and is an Annexure to the Audit Report. Form 3CD contains 32 Clauses. It is required to be attached with Forms 3CA or 3CB, as applicable.

In a representation made to the Central Board of Direct Taxes (CBDT), the ICAI said that due to the revisions made in Form No. 3CD vide the aforesaid notification, various new clauses/ sub clauses have been inserted, major amendments have been made and some additional disclosures are to be reported.

“Moreover, the Direct ‘Faxes Committee of KAI will have to revise its ‘Guidance Note on ‘Tax Audit under section 44AB of the Income-tax Act, 1961’ with regard to changes made in Form No. 3CD and for providing guidance to members. Therefore, we fervently request your good self to kindly implement the new forms from Assessment Year 2019-20 to ensure smooth operations & also for timely compliance,” ICAI said.

The applicability date specified in the Notification is 20^th August 2018. As per the representation, it will cause discrimination between two sets of assessees, those who could file Form 3CD before the cut- off date and those who will file after the cut- off date. Many audits have started and it’s not possible to complete it by19th August 2018 and moreover, the time given to implement new forms is very less which will make it difficult for the taxpayers to comply their statutory obligations in a timely and effective manner.

The ICAI has suggested that changes made in Form No. 3CD be implemented from AY 2019-20 for smooth implementation and compliance. It is further suggested that the new clauses may be reconsidered and appropriately modified preferably after due consultation with the stakeholders.

GST on ENA: Final decision to be taken by GST Council [Read Letter]

The Commissioner of State Tax & Excise, Himachal Pradesh, on Saturday said that a final decision on the issue of the taxability of Extra Neutral Alcohol ( ENA ) will be taken as per the decision of the GST Council.

On 1st August, the Commissioner Rajiv Sharma had clarified that the ENA used to manufacture alcoholic liquor human consumption would attract 18 percent Goods and Services Tax.

On 5th August 2017, the GST Council had decided to obtain a legal opinion of the Attorney General of India regarding the taxability ENA under the GST regime. In response, the Advocate General had opined that “ENA typically contains 95% alcohol by volume and as such is not fit for human consumption. Under article 246A (1) read with 366(12A), GST cannot be levied on the supply of “alcoholic liquor for human consumption”. ENA that is used for the manufacture of alcoholic liquor does not supply for the purpose of human consumption it is not consumed directly but goes through a process of manufacture.”

Following the opinion of the Attorney General, the Commissioner, in a letter addressing the officials also directed the suppliers of ENA to get registered with the new tax regime.

According to sources, the GST Council, in its last meeting, couldn’t reach a conclusion on this matter as most of the States were opposing the decision.

In the present communication, it was clarified by the Commissioner that “this is in continuation to letter No 12-13/2018-19-EXN-GST-23205-23223 dated 01-08-2018, it is clarified that the above-mentioned communication was meant to share the opinion furnished by solicitor general Govt of India. It is further pointed out that the issue of levy of GST on ENA is subject to the final decision on the Item No 7(xi) of the 20th meeting of GST Council and will be implemented on receipt of appropriate notification/direction from GST council.”

Providing Transport Facility to Workers is only a Welfare Measure, Not ‘Input Service’: CESTAT denies Credit [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad bench has ruled that providing transport facility to workers from their residence to the factory would not fall within the scopeof ‘input service’ as the same would constitute a welfare measure.

In the instant case, the assessee- appellants, Andhra Organics Ltd, had availed credit of tour operator services used for transporting their employees from their residence to the factory. However, the department denied the same by holding that the Bus Hire charges are in the nature of rent a cab operator service.

The bench noted that input services on which credit is allowed have to be used by manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to the place of removal as per Section 2 (l) of the CENVAT Credit Rules, 2004.

It was observed that bringing the workers to the factory from homes cannot be termed as an input service is in relation to the manufacture of final products.

The bench further relied on the Bombay High Court’s decision in the case of Manikgarh Cement and observed that “Every activity undertaken by a business can have some remote relation to their business. The question is where you draw the line to decide whether it is used in or in relation to the manufacturer. In my opinion, the line can be drawn at the factory. Once the workers come into the factory their services are used in relation to the manufacture of final products. But bringing workers to the factory or providing accommodation to them outside the factory or providing any other welfare measures for the workers or their families have no nexus with the manufacture of the final products, although they are welfare measures meant for the general well-being of the workers who manufacture the goods. Thus, in this case, I find that the assessee is not entitled to the credit of service tax paid on the buses hired to bring workers to their factory.”

Interest Paid to Private Bank can’t be disallowed u/s 43B: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Hyderabad bench has held that the amount of interest paid to a Private bank is out of the purview of Section 43B of the Income Tax Act, 1961 and therefore, the same cannot be disallowed.

Assessee paid an amount of Rs. 1,76,564 towards Hire Purchase interest to HDFC Bank Ltd, Interest on service tax, excise duty, Interest on ESI delay payments etc. the Assessing Officer has disallowed the amount by invoking section 43B.

The bench noted that the Supreme Court in various decisions held that levy of interest on breach of the respective Act is compensatory in nature.

“The interest which is in the nature of breach of Act alone can be disallowed and in compensatory nature cannot be disallowed. Ld. CIT(A) has relied on case laws on sales tax. In those cases, it was held that sales tax is a statutory obligation. But, in the present case, the interest is levied on service tax, excise duty and ESI. In our view, these are compensatory in nature unlike sales tax Act. Therefore, the provisions of section 43B are not attracted,” the bench said.

With regard to interest paid to HDFC Bank, the bench clarified that HDFC Bank is not public financial institution.

“It is only private sector Bank. Interest paid to HDFC is outside the purview of section 43B. Therefore, the amounts paid towards interest under the aforementioned heads, do not come under the provisions of section 43B, hence, the disallowance is hereby deleted,” the bench added.

Trust cannot be treated as a ‘Non-Banking Financial Institution’: CESTAT [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that a Trust cannot be termed as a ‘Non-Banking Financial Institution’ for the purpose of levying tax under the head ‘Banking and Other Financial Services’ under the Finance Act, 1994.

The appellants, Mahasemam Trust are primarily engaged in micro-financing (small scale lending) to poor women members of self-help groups, and were charging interest on such loans apart from collecting various other charges like processing charge, application charges Group Maintenance Charges, etc., from the borrowers.

The department demanded service tax by holding that the assessee is a non-banking financial institution is engaged in lending activity and the activity would fall under ‘Banking and Other Financial Services’.

The assessee contended that during the major part of the demand, the taxable service would attract levy of service tax only if it is rendered by a banking company or a financial institution or a non-banking financial company. The assessee, being a Trust, does not fall under any of these categories, they argued.

It was noted that for a limited period from 01.05.2006 to 30.05.2007, the said taxable service as given in Section 65(105)(zm) was amended to include the words “any other person”.

The first appellate authority held that the assessee can be treated as “any other person” ad confirmed the demand.

The bench noted that in the Show Cause Notice, it was said that the assessee is a non-banking financial institution and therefore is liable to pay Service Tax for the Banking and Financial Services.

“This being so, in our view, the Commissioner has traversed beyond the scope of Show Cause Notice to confirm the demand for the period 01.05.2006 to 30.04.2007. From the provisions of law reproduced above, it can be seen that the Commissioner has rightly dropped the demand for the period from 01.10.2004 to 30.04.2006 and for 01.05.2007 to 30.11.2009 when the words “any other person” was not part of the definition under Section 65(105)(zm),” the bench said.

No Service Tax on Renting of Office Fit Outs to Tenants If there is Separate Agreement: CESTAT [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the service tax cannot be imposed on the fit-outs rented along with the leased premises if there is separate agreements.

The appellants, M/s. Khivraj Techpark Pvt. Ltd is engaged in providing Renting of Immovable Property Services. The department noted that the appellants are not discharging service tax on the fit-outs leased to the tenants and demanded the same on the rent received for leasing fit-outs.

The appellants contended that a separate agreement was entered with the tenants for leasing the fit-outs in the premises and does not form part of renting of immovable property at all. Since the appellants have discharged VAT on the said amount, the Department cannot again levy service tax. Service tax and VAT are mutually exclusive, they argued.

The bench noted that the appellants have entered into two different agreements for leasing the premises and leasing the fit outs. The fit-outs include air conditioners, CCTV, fire alarms, etc. Appellants are discharging VAT on the rent received for leasing the fit-outs and they have been discharging VAT even before the services of renting of immovable property became taxable.

Relying on the judicial decisions, the bench noted that since VAT and service tax being mutually exclusive, service tax cannot be demanded on the very same consideration received for renting of movable properties.

“Since there are two separate agreements for renting of fit-outs and renting of premises, it can never be said that the amount received for renting of fit-outs/movable properties would fall under renting of immovable properties. Following the above decisions, we are of the view that the demand cannot sustain and requires to be set aside, which we hereby do. The impugned orders are set aside,” the bench said.

Breaking: GST Council Special Meet approves Cashback for Digital Payments

The 29th GST Council meeting held at New Delhi Today has approved the decision to give incentives on digital payments using BHIM app. The move aims at encouraging digital transactions which the Government promotes. The Council approved 20% cashback for the transaction via BHIM app.

The Special meeting was aimed to discuss the issues of the Micro, Small and Medium Enterprises (MSMEs). 157 issues were submitted before the Council.

While addressing the media after the meeting, the Finance Minister Piyush Goyal said that several issues related to small businessmen and retailers were discussed in the meeting. He said that the GST council has decided to form a sub-committee under the leadership of Shiv Pratap Shukla, Minister of State for Finance. Delhi Minister Manish Sisodia, Finance Minister of Punjab & Finance Minister of Kerala will be a part of this committee. The committee will study the issues and make recommendations to ease the issues of MSMEs.

The Law Committee will take decisions related to law. Fitment Committee will take decisions related to rates, Piyush Goyal said.

The next GST Council meeting is scheduled end of September at Goa.

ICAI writes to Newspaper for publishing Misleading Content

The Institute of Chartered Accountants of India ( ICAI ) has sent a letter to a leading newspaper for a news item titled “Chartered Accountants ki round table Conference.”

On 30th July 2018, it has been stated in the news item that Global Center for Entrepreneurship and Commerce & Association of Chartered Certified Accountant had organized a Round Table Conference at Jaipur.

“The headline of the news item mentions that a Round Table Conference of Chartered Accountants, whereas the content of the news item mentions about the Round-table Conference organized by a Global Center for Entrepreneurship and Commerce & Association of Chartered Certified Accountant. The headline is contradictory to the content,” the letter said.

“Would like to bring to your notice that The Institute of Chartered Accountants of India had not organized any such programme, hence the headline used in the news item is not correct. The ICAI takes a strong exception to the headline of the news item, as it is misleading/incorrect. It is quite unfortunate that the headline of the article appearing in a reputed publication is not in tandem with the news covered in the article. We would like to inform that The Institute of Chartered Accountants of India (ICAI) is a statutory body set up under an Act of Parliament to regulate the Profession of Chartered Accountants in India. The Institute upholds the ethical values that form the hallmark of the profession,” it said.

You are requested to publish the necessary clarification in the form of a news item in the same manner and at a conspicuous position as the news item published earlier so as to put the facts in the right perspective. We are sure that as responsible news daily, you will be discharging your said duty.

Last week, the ICAI Chief Naveen N D Gupta has confirmed that the Institute had taken strong action against the misleading media reports against the Chartered Accountants community.

“We have taken strong note of the manner in which the headline of a news item about conmen masquerading as CAs has been printed in a leading newspaper. The report has talked about fake CAs helping unscrupulous taxpayers claim ‘hefty tax refunds’. However, the use of the term ‘CAs’ in the headline makes the report misleading for the readers in the first impression, and this appears grossly derogatory to us CA professionals. We have filed a complaint with the Press Council of India and issued a show-cause notice to the newspaper that has published the report. Rest assured, we are also proactively taking note of all such reports in the media that portray our profession in bad light including weighing suitable legal remedies,” Gupta said.

ENA Attracts 18% Tax: GST dept asks Suppliers of ENA to obtain Registration [Read Letter]

The Commissioner of State Tax & Excise, Himachal Pradesh has clarified that the Extra Neutral Alcohol ( ENA ) used to manufacture alcoholic liquor human consumption would attract 18 percent GST. In a letter addressing the officials, the Commissioner Rajiv Sharma directed the suppliers of ENA to get registered with the new tax regime.

On 5^th August 2017, the GST Council had decided to obtain a legal opinion of the Attorney General of India regarding the taxability ENA under the GST regime.

In response, the Advocate General had opined that “ENA typically contains 95% alcohol by volume and as such is not fit for human consumption. Under article 246A (1) read with 366(12A), GST cannot be levied on the supply of “alcoholic liquor for human consumption”. ENA that is used for the manufacture of alcoholic liquor does not supply for the purpose of human consumption it is not consumed directly but goes through a process of manufacture.”

He, therefore, opined that the judgment of the court in “Bihar Distillery” does not denude the Centre or the States of the power to levy GST on EVA that is used to manufacture alcoholic liquor human consumption.

“In view of the above, it is informed that GST will be applicable on the supply of ENA which is used for the manufacturing of alcoholic liquor for human consumption. Accordingly, the suppliers of ENA are required to be registered under the GST Act & GST is to be levied on the supply of ENA. It is further informed that as per entry no. 25 of Schedule-III of the notification no. 01/2017 State Tax (Rate) dt. 30.06.2017 & 01/2017- Central Tax (Rate) dt. 28.06.2017 the supply of ENA is exigible to be taxed a, 18% GST.”

ICAI allows Open Book Exam in Elective Subjects of Paper 6 of Final (New) Course

The Institution of Chartered Accountants of India ( ICAI ) has decided to allow open book exam in the elective subjects of Paper 6 of Final (New) course.

ICAI had introduced elective subjects in Paper 6 in the CA Final (New) course exam from May 2018 exam and onwards, which is being held on open book methodology.

In this regard, it is hereby clarified that it has been decided as follows in respect of Paper 6 Electives- of Final (New) course exam:

• Candidates will be permitted to bring their own material to the exam hall and consult them for answering the questions in the exam. Such material may include study materials, practice manuals, revisionary test papers supplied by ICAI, text books, bare Acts, notes by students or any other reference material.
• Candidates will not be permitted to bring mobile phones, I pads, or any other electronic devices into the exam hall.
• Exchange of any material amongst candidates will not be permitted inside the examination hall/room.

The above mentioned procedure will be effective from the Final(New) examination to be held from November 2018 and onwards.

More than 2 Lakh Companies under MCA Scanner for not Filing Returns for Year 2015-16 & 2016-17, says P.P. Chaudhary

The Government has informed  that, MorLok Sabhae than 2 Lakh Companies under MCA Scanner for not Filing Returns for Year 2015-16 & 2016-17.

Union Minister of State for Law & Justice and Corporate Affairs P.P. Chaudhary said in Lok Sabha today that during the financial year 2018-19, a total of 2,25,910 companies have been identified for action under Section 248 of the Act on the basis of non- filing of due returns for the financial Year 2015-16 & 2016-17. The due procedure shall be followed by ROCs before striking off names of companies.

The Minister further said that during 2017-18 the Registrars of Companies (ROCs) had identified 2.97 lakh companies which were not filing their Financial Statements or Annual Returns for a continuous period of two or more financial years and, prima facie, either were not conducting any business or were not in operation. Out of such identified companies, Registrars of Companies (ROCs) removed the names of 2,26,166 such companies from the register of companies by following the due process under Section 248 of the Companies Act, 2013. Further, the Central Government has ordered the investigation into the true ownership of 68 number of companies under section 216 read with section 210(1) (c) of the Act, which has deposited and withdrawn fund in an exceptional manner from the bank accounts during demonetization period.

This was stated by Union Minister of State for Law & Justice and Corporate Affairs Shri P.P. Chaudhary in Lok Sabha today.

DETAILS OF THE NUMBER OF COMPANIES WHICH HAVE FILED AS WELL AS NOT FILED THEIR FINANCIAL STATEMENT DURING THE LAST ONE YEAR IN STATE/UT-WISE ARE AS UNDER:

Effluents are not ‘Goods’ for imposing Service Tax on GTA Services: CESTAT Quashes Tax Demand on ONGC [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), while quashing service tax demand made by the department against ONGC, held that the effluents cannot be treated as ‘goods’ for the purpose of imposing service tax under the head ‘Goods Transport Agency’ under the Finance Act, 1994.

The appellants, in the instant case, are a Public Sector Undertaking primarily engaged in the oil and gas exploration activities around Karaikkal region. They extracts well fluids from the well head which is then transported to the production installations where the effluent water is separated from the well head. The crude oil that emerges is then sent to the refinery through pipeline. Effluent water separated from the condensate is transported to the Effluent Treatment Plant (ETP) to fulfil pollution control norms. The department took a view that the transportation of effluents by the appellants is subject to service tax.

The assessee claimed that the said activity would not attract service tax liability under GTA service since the same cannot be treated as ‘goods’.

Referring a catena of judicial decisions, the tribunal bench held that the transportation of effluents cannot be treated as transportation of ‘goods‛ and hence there cannot be any service tax liability under ‘Goods Transport Agency’ as defined in Section 65 (150b) of the Finance Act, 1994.

“This being so, the tax liability of Rs.11,24,258/- and the penalty imposed thereof cannot sustain and are set aside,” the bench said.

Providing Food by maintaining Menu Card with Fixed Price is ‘ Restaurant Services ’, not Outdoor Catering: CESTAT [Read Order]

The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the concepts of restaurant services and outdoor catering are distinguishable and the providing of food maintaining a menu card with fixed price personal interaction with the service recipient is restaurant service.

In the instant case, the appellant was providing food services in the premises of Noida Golf Course at Noida under an agreement for a consideration of Rs. 3 lakhs per month. For the above services, they were remitting service tax under the head ‘restaurant services’. The department held that the respondent falls under the category of “outdoor catering service” and the said service is taxable since 2003.

After analyzing the definitions given under the Act, the bench noted that the “outdoor catering service” is to be provided at the premises of the service recipient at his own premises or the premises were taken on hire by the service recipient whereas in the case of “restaurant service” to be provided by the service provider in its own premises.

Allowing the contentions of the assessee, the bench observed that “Admittedly, in this case, the place of service had been provided by the respondent as taken on rent from Noida Golf Course. In that circumstances, place, where the service has been provided, is the premises of the respondent. Further, we find that the issue where the service undertaken by the respondent is a restaurant service or the “Outdoor Catering Service‟ has been examined by the From the above observation of the Hon‟ble Apex Court, it is clear that the service of restaurant and outdoor caterer are distinguishable. Admittedly the services provided by the respondent in a restaurant of Noida Golf Course are in the nature of „restaurant service‟ as respondent is maintaining menu card, prices fixed in every item and there is no personal interaction with the service recipient in the restaurant. In that circumstances, we hold that the services provided by the respondent do qualify as „restaurant service‟. Therefore, no demand is sustainable against the respondent under the category of “outdoor catering service”.

Reimbursement of Expenses to C&F Agents for achieving Targets not subject to TDS: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Kolkata bench has ruled that the provisions relating to tax deduction at source (TDS) cannot be applicable to reimbursement of expenses to C&F Agents for achieving their sales targets.

The assessee, in the instant case, made reimbursement of the expenses claimed by C & F agents. According to the assessee, the reimbursement was made by the assessee to the C & F agents to the distributors only on achieving a target or under a scheme and was in nature of sale promotion.

During the assessment proceedings, the Assessing Officer disallowed the expenses by invoking section 40(a)(ia) on ground of non-deduction of tax at source under Section 194C of the Income Tax Act, 1961.

The CIT(A) found the entire impugned amount is in the nature of reimbursement or incentive and held that the AO is wrong treating the entire expenditure as commission.

Before the Tribunal, the assessee contended that it is not a commission and there is no principal and agent relationship. It is a sales promotion to grow simultaneously. It is a benefit to the distributor and assessee has no relationship with the distributor, they argued.

The bench noted that the assessee incurred foreign trip expenses to an extent of Rs.11,18,000/- and the credit notes were placed. It was noted that a trip to Thailand offered to one person on achieving sale of 75 boxes or 2700 pieces.

“In our opinion, it is not a commission and is additional benefit given to the C&F agents. The CIT(A) examined the list of payments made to individual staff and having finding no adverse comment from AO in the remand proceedings upheld the contention of assessee that it was paid to showroom staff directly to boost the sale at an average of Rs.3,600/-. The contention of Ld.AR was that no deduction of TDS is required on the reimbursement of expenses on sales promotion.”

The bench further relied on the decision by the High Court of Andhra Pradesh & Telangana in the case of United Breweries Ltd. in which it was held that discounts offered by the Andhra Pradesh Beverages Corporation Ltdto the retailer could only be treated as sales promotion expenses, and not as the commission for the purpose of TDS.

Mobile Phone Batteries sold to Customers attract 28% GST: AAR [Read Order]

The Advance Ruling Authority ( AAR ), Haryana has clarified that the mobile phone batteries would attract 12 percent tax on supplying the same to manufacturers and a higher tax rate of 28 is applicable when the same is sold to the end-consumers.

The applicant has made an additional investment in the manufacturing of batteries for mobile phones and started the production or the said mobile phone batteries and are supplying the same to domestic handset manufacturers.

The applicants sought for a clarification on the tax rates applicable to ‘Battery for Mobile Handset’ separable or non-separable, detachable or non-detachable, when sold to the mobile handset manufacturers who uses the same to make it form part of the mobile handset. They also sought for tax rate applicable on the same product when sold to the customers.

The authority noted that accepted the contentions raised by the applicant that a mobile phone cannot function or cannot be operated without a battery, whether the same is detachable/separable or not. Hence, mobile phone batteries qualify as part of the mobile phone.

It was, therefore, clarified that the product ‘Battery for Mobile Handset’ whether it be separable or non-separable i.e. whether it be detachable or non-detachable when sold to the mobile handset manufacturers who use the same to make it form part of the mobile handset will be taxed at 12 per cent.

However, it was held that 28 per cent tax will be levied if the said product is sold to the customers other than mobile handset manufacturers who do not use the same- in the manufacture of the mobile handset.