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The Tax PublishersSection C Some Commonly Asked Questions in Indirect Taxes R. Muralidharan 1. Can the Commissioner (Appeals) in service tax has power to reduce, or not to impose penalty? Yes. Section 80 of the Finance Act has given this power to Commissioner (Appeals) to reduce or waive penalty. It has been held so in CCE v. Madburi Travels (2009) 23 STT 45 (Bom) by the High Court of Bombay. 2. How about service tax on software? Non-customised software like oracle/foxpro/ tally, etc., will attract VAT (in Tamilnad it is 4%) whereas customised software will attract service tax. Customised software refers to software designed for a customer alone. 3. What is the basic difference between VAT and service tax with regard to Transfer of right to use any goods? In VAT, transfer of right to use involves transfer of both possession and control of the goods to the user of the goods. In service tax, transactions of allowing another person to use the goods without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service. 4. Can the department go against the order of the adjudicating authority in service tax? No. There is no provision under service tax, if the order is passed by adjudicating authority lower than Commissioner of Central Excise. 5. Can mere non-registration in service tax, be a cause for invoking extended period? No. Mere non-registration is not sufficient. Reasons for invocation need to be clearly spelt out in showcause notice.--Vide Mahakoshal Beverages (P) Ltd. v. Commissioner 2006 (3) STR 334 (Tri-Bang). 6. In service tax, audit party visited the unit and audited every thing. Can extended period of 5 years be invoked by the department? No. When returns are properly filed and audit has also been conducted, extended period is not invocable. This was decision in Sipani Fibres Ltd. v. Commissioner 2007 (6) STR 197 (Tri-Bang). This is a decision in Central Excise but equally applicable in service tax also. 7. My client is canvassing business for advertisement in media. They offer him cash discount. Is service tax applicable on this? Cash Discount is not chargeable under advertisement services but is taxable under Business auxiliary service.--Vide Marketing Consultants v. CST (2007) 6 STT 318 (CESTAT). 8. Are fashion shows covered under service tax? Yes. This is covered under Business exhibition services w.e.f. 10-9-2004. 9. Is service tax payable on interest charged by service provider? No. There is no specific provision as of today. In Thermax Ltd. v. CCE (2007) 12 STT 89 (CESTAT), it was held that interest is compensation for use or detention of money and hence cannot be considered as consideration. 10. Is service tax payable on advance receipts towards services to be provided in future? Yes. After 13-5-2005, service tax will be payable as soon as advance is received even if service is provided later. This view has been confirmed in MF (DR) Circular No. B1/6/2005/TRU/27-7-2005. 11. Service tax is to be paid only on actual receipts. One assessee paid service tax immediately on billing. The customer paid lesser amount towards value of services. Can he claim refund? Service tax is to be paid only on actual receipts. However, in a situation stated by you as above, refund was held allowable in Prachar Communications v. CCE (2006) 4 STT 171 (CESTAT-SMB). 12. Can excess service tax paid in one unit be adjusted against shortfall in another unit of the same company? If the registration is only one, this is possible. When two different registrations have been taken, for two units separately, then shortfall has to be paid and for the excess, refund application has to be filed. 13. Is a tour operator having a single vehicle only covered under service tax? Yes. The tour operator can be self-employed single vehicle owner or a well organised firm providing a vast range of professional services in the field of tourism, whether organised as a sole proprietorship, partnership a private or a public limited company, the public sector units, ITDC are also covered. 14. We are running a canteen in a factory premises. Are we covered under service tax? Yes. Since the space has been provided by the employer and you are running the canteen, you will be treated as outdoor caterer and hence service tax in your case is applicable from 16-6-2005. If the service is directly provided by the management, then service tax is not applicable. 15. Is rounding off needed in every service tax invoice? Section 37D of Central Excise Act applicable to service tax, does not say so. The rounding off is needed for monthly/quarterly payment to government. However, for the sake of convenience, there is no harm in rounding off each invoice. CENTRAL EXCISE 1. We are supplying Central excise dutiable goods to a 100% EOU factory which uses it in its manufacture and exports the finished goods. What documents should we use? As a supplier of excisable goods to a 100% EOU, you have to : n obtain CT-3 from the 100% EOU for supplying the component duty free n Invoice to be sent to the 100% EOU ARE-3 has to be prepared and sent to 100% EOU You must inform your local Central Excise Office with copies of all these. 2. A person with Central excise registration wants to do trading business. What is the procedure? A person with Central excise registration for manufacture, can do trading business of his own products but when he wants to do trading of other products, a simple letter asking for permission is needed. He has to maintain separate stock accounts and invoices, etc. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersSection C

Some Commonly Asked Questions in Indirect Taxes

R. Muralidharan

1. Can the Commissioner (Appeals) in service tax has power to reduce, or not to impose penalty?

Yes. Section 80 of the Finance Act has given this power to Commissioner (Appeals) to reduce or waive penalty. It has been held so in CCE v. Madburi Travels (2009) 23 STT 45 (Bom) by the High Court of Bombay.

2. How about service tax on software?

Non-customised software like oracle/foxpro/ tally, etc., will attract VAT (in Tamilnad it is 4%) whereas customised software will attract service tax. Customised software refers to software designed for a customer alone.

3. What is the basic difference between VAT and service tax with regard to Transfer of right to use any goods?

In VAT, transfer of right to use involves transfer of both possession and control of the goods to the user of the goods.

In service tax, transactions of allowing another person to use the goods without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service.

4. Can the department go against the order of the adjudicating authority in service tax?

No. There is no provision under service tax, if the order is passed by adjudicating authority lower than Commissioner of Central Excise.

5. Can mere non-registration in service tax, be a cause for invoking extended period?

No. Mere non-registration is not sufficient. Reasons for invocation need to be clearly spelt out in showcause notice.--Vide Mahakoshal Beverages (P) Ltd. v. Commissioner 2006 (3) STR 334 (Tri-Bang).

6. In service tax, audit party visited the unit and audited every thing. Can extended period of 5 years be invoked by the department?

No. When returns are properly filed and audit has also been conducted, extended period is not invocable. This was decision in Sipani Fibres Ltd. v. Commissioner 2007 (6) STR 197 (Tri-Bang). This is a decision in Central Excise but equally applicable in service tax also.

7. My client is canvassing business for advertisement in media. They offer him cash discount. Is service tax applicable on this?

Cash Discount is not chargeable under advertisement services but is taxable under Business auxiliary service.--Vide Marketing Consultants v. CST (2007) 6 STT 318 (CESTAT).

8. Are fashion shows covered under service tax?

Yes. This is covered under Business exhibition services w.e.f. 10-9-2004.

9. Is service tax payable on interest charged by service provider?

No. There is no specific provision as of today. In Thermax Ltd. v. CCE (2007) 12 STT 89 (CESTAT), it was held that interest is compensation for use or detention of money and hence cannot be considered as consideration.

10. Is service tax payable on advance receipts towards services to be provided in future?

Yes. After 13-5-2005, service tax will be payable as soon as advance is received even if service is provided later. This view has been confirmed in MF (DR) Circular No. B1/6/2005/TRU/27-7-2005.

11. Service tax is to be paid only on actual receipts. One assessee paid service tax immediately on billing. The customer paid lesser amount towards value of services. Can he claim refund?

Service tax is to be paid only on actual receipts. However, in a situation stated by you as above, refund was held allowable in Prachar Communications v. CCE (2006) 4 STT 171 (CESTAT-SMB).

12. Can excess service tax paid in one unit be adjusted against shortfall in another unit of the same company?

If the registration is only one, this is possible. When two different registrations have been taken, for two units separately, then shortfall has to be paid and for the excess, refund application has to be filed.

13. Is a tour operator having a single vehicle only covered under service tax?

Yes. The tour operator can be self-employed single vehicle owner or a well organised firm providing a vast range of professional services in the field of tourism, whether organised as a sole proprietorship, partnership a private or a public limited company, the public sector units, ITDC are also covered.

14. We are running a canteen in a factory premises. Are we covered under service tax?

Yes. Since the space has been provided by the employer and you are running the canteen, you will be treated as outdoor caterer and hence service tax in your case is applicable from 16-6-2005. If the service is directly provided by the management, then service tax is not applicable.

15. Is rounding off needed in every service tax invoice?

Section 37D of Central Excise Act applicable to service tax, does not say so. The rounding off is needed for monthly/quarterly payment to government. However, for the sake of convenience, there is no harm in rounding off each invoice.

CENTRAL EXCISE

1. We are supplying Central excise dutiable goods to a 100% EOU factory which uses it in its manufacture and exports the finished goods. What documents should we use?

As a supplier of excisable goods to a 100% EOU, you have to :

n obtain CT-3 from the 100% EOU for supplying the component duty free

n Invoice to be sent to the 100% EOU ARE-3 has to be prepared and sent to 100% EOU

You must inform your local Central Excise Office with copies of all these.

2. A person with Central excise registration wants to do trading business. What is the procedure?

A person with Central excise registration for manufacture, can do trading business of his own products but when he wants to do trading of other products, a simple letter asking for permission is needed. He has to maintain separate stock accounts and invoices, etc.