INDIRECT TAX NEWSLETTER
Notifications / Circulars / Clarifications
1 – 4
Recent Case Laws
5 – 7
3 February 2016
Notifications / Circulars
Customs & Foreign Trade Policy (FTP)
The Director General of Foreign Trade (DGFT) has notified the procedure for modification or change in the branch office, head office or registered office which involves change in the Regional Authority (RA). The application for the change is to be made to the new RA who shall act on the basis of this application.
Public Notice No 53 / (2015-2020) dated 5 January 2016)
The DGFT has simplified the procedure for obtaining Import-Export Code (IEC) with effect from 29 January 2016. It has now prescribed only 2 documents viz. (i) a copy of PAN card of the business entity; and (ii) a cancelled cheque from the applicant. Further, the applications for IEC / modification in IEC can be made only in online mode through digital signatures with effect from 1 April 2016.
(Ref: Notification No 34 / (2015-2020) dated 29 January 2016)
The existing notifications - No56/2002-CE and No 57 / 2002-CE dated 14 November 2002 which provides excise duty exemption / rebate to new industrial units in specified areas of Jammu & Kashmir have been amended to include the sunset clause of 31 March 2016.
(Ref: Notification No 3 /2016- CE dated 22 January 2016)
The Government of Bihar has amended the formula for reversal of credit under Rule 14 of the Bihar Value Added Tax Rules, 2005. Henceforth, reversal of credit is to be done on a proportionate basis as per the prescribed formula. The earlier provision mandated reversal to the extent of 4%.
(Ref: Notification No S O 12 dated 13 January 2016)
The Central Government has notified the Sugar Cess (Amendment) Act 2016 raising the amount of Cess from INR 25 to INR 200 per quintal.
(Ref: The Sugar Cess (Amendment) Act 2016 (No 9 of 2016))
The Union Territory of Damn & Diu has notified the Daman and Diu Value Added Tax (Amendment) Regulation, 2015 whereby the base rate for goods falling in the Third Schedule has been increased from 4% to 5%.
(Ref: Notification No DMN/VAT/Part File/57-2/2014-15/453 dated 13 January 2016)
The Government of Delhi has partially modified the conditions for auto-downloading of statutory forms under the Central Sales Tax Act 1956. These are stated below:
Auto-downloading of these forms is not available where the ratio of sale to purchase including stock transfer and local transactions is below 45%. The statutory forms in such cases shall be available for auto-downloading on the basis of sale and purchase of next quarter. In essence, the ratio of sale to purchase will be calculated for both quarters cumulatively till such time ratio exceeds 45%.
Purchase of capital goods is outside this mechanism.
Downloading is also subject to prescribed conditions.
(Ref: Notification No F 3(556)/Policy/VAT/2015/1271-82 dated 08 January 2016)
As a step towards digitization in the State of Tamil Nadu, a new E-Service facility was rolled out by the Chief Minister on 29 January 2016, referred as ‘e-C Tax project’. The new website launched for Commercial Taxes Department with immediate effect is - https://ctd.tn.gov.in. Assesses shall be hereafter required to upload their monthly TNVAT and CST returns through the new website (except for January 2016 returns, to be filed in February 2016).
The Government of Tamil Nadu has notified the following Acts which are effective from 29 January 2016:
Tamil Nadu Value Added Tax (Second Amendment) Act 2015; and
Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas (Amendment) Act 2015.
(Ref: Notification No G O Ms No 15 dated 29 January 2016 and Notification No G O Ms No 17 dated 29 January 2016)
The Government of Gujarat has notified additional documents to be filed by dealers availing benefit under incentive schemes. Henceforth, such dealers will be required to file monthly and annual returns in the prescribed form providing prescribed details.
(Ref: Notification No (GHN-5) VAR-2016(37) / TH dated 08 January 2016)
The Government of Jharkhand has extended the operation of the Amnesty Scheme to 15 March 2016 for filing applications and 31 March 2016 for payment of arrears.
(Ref: Government Order No 98 dated 07 January 2016)
The Government of Madhya Pradesh has exempted dealers who establish a new industrial unit and follow procedures prescribed under the Industrial Promotion Policy, 2014 from payment of entry tax.
(Ref: Notification No F A 3-33-2014-1-FIVE(03) dated 14 January 2016)
The Government of Madhya Pradesh has notified the Madhya Pradesh Bakaya Rashi (Sick and Closed Industrial Units) Saral Samadhan Yojana, 2014 for easy exit and recovery / payment of tax arrears by sick and closed industrial units.
(Ref: Notification No F A 3-33-2014-1-FIVE(08) dated 14 January 2016 read with Notification No F A 3-33-2014-1-FIVE(09) dated 14 January 2016)
The Government of Odisha has increased the base rate of goods falling in Part III, Schedule B from 13.5% to 14.5%.
(Ref: Notification No 80-FIN-CT1-TAX-0020-2015 dated 1 January 2016)
The Government of Odisha has made several amendments to the Odisha Value Added Tax Rules, 2005. Changes relate to valuation for works contrAct quantum of input tax credit and various other procedural requirements.
(Ref: Notification No 1465-FIN-CT1-TAX-0001-2013 dated 16 January 2016)
The Government of Odisha has notified the rate of composition tax and stamp duty for works contract subject to various conditions specified therein.
(Ref: Notification No 1457/FIN-CT1-TAX-0035/2015 dated 16 January 2016 read with Notification No 1461/FIN-CT1-TAX-0035/2015 dated 16 January 2016)
The Government of Rajasthan has modified the procedure prescribed under the Rajasthan Value Added Tax Rules, 2006 in respect of registration and allied issues. These changes shall be effective from 1 February 2016.
(Ref: Notification No F 12(79)FD/Tax/2014-111 dated 8 January 2016)
The Government of Rajasthan has notified the Amnesty Scheme 2016 under which, penalty and interest can be waived on complying with specified requirements.
(Ref: Notification No F 12(16)FD/Tax/2009-116 dated 21 January 2016)
The Government of Rajasthan has notified information to be furnished by e-commerce companies and persons notified under section 80A of the Rajasthan Vat Act 2003 for every month or part thereof as prescribed in Form EL-1, EL-2 and EL-3 within 15 days from the end of the relevant month through the official website of the Department in the manner as provided therein. This notification is made effective from 1 February 2016.
(Ref: Notification No F 16(708)TAX/CCT/2015/7307 Dated 31 December 2015)
The Government of Rajasthan, in order to operationalise the mandatory furnishing of information by e-commerce companies as notified vide the notification dated 31 December 2015 (supra) has issued Circular to facilitate such online information submission.
(Ref: Circular No 10/2015-16- No F.16 (95)/Tax/CCT/14-15/2171 to 2178 dated 28 January 2016)
The Government of Maharashtra has notified an amendment in the Maharashtra Value Added Tax Rules, 2005 (‘MVAT Rules’). Vide the said notification, a new Rule 52B has been inserted relating to the availment of set-off in respect of goods covered under entry No 13 (Aerated and non-aerated drinks) and 14 (Cigarettes) of Schedule D of the MVAT Act.
(Ref: Notification No VAT 1515/CR-158/Taxation-1 dated 30 December 2015)
The Government of Delhi has extended the last date of filing of online return in Form 9 for the year 2014-15 to 29 February 2016, which is prescribed under the Central Sales Tax (Delhi) Rules, 2005. Such return is to be filed by dealers who have made interstate sales at concessional rates against statutory forms or claimed deduction against E-I/EII and I/J forms, as the case may be.
(Ref: Circular No 34 of 2015-16 dated 15 January 2016)
The Government of Goa has recently issued Frequently Asked Questions (FAQs) in relation to levy of Value Added Tax on developers and builders of property. Such FAQs aim to clarify the position and legal regime relating to all applicable Value Added Tax provisions with effect from 1 November 2015.
(Ref: Frequently Asked Questions [FAQ’s] on Taxation of Developers of Property dated 02 January 2016)
The Government of Gujarat has issued a circular which directs dealers to make mandatory e-payment of the tax liabilities (including tax, interest and penalty) exceeding INR 50,000 in the tax period. This is applicable with effect from December 2015 (earlier, mandatory e-payment of taxes was applicable for the dealers whose tax payment or tax payable amount exceeds INR 10 Lacs in any financial year).
Ref: Circular No Gujka/vat-86/2015-16/JA.178/153) dated 6 January 2016)
Recent Case Law
The Supreme Court (SC) held that customs duty is leviable on actual imports and not on the basis of quantity declared in the bill of lading.
The issue before the SC was whether customs duty on crude oil should be levied on quantity mentioned in the bill of lading or on the quantity actually received into the shore tanks in India. The petitioner, Mangalore Refinery & Petrochemicals Ltd, imported crude oil by voyages of vessels during the period January 1996 to March 1998. A show cause notice was issued stating that the bill of lading quantity should be the basis of payment of customs duty since duty was on ad valorem basis and not on a specific rate. The Commissioner and the Custom Excise & Service Tax Appellate Tribunal (CESTAT) were of the view that since the basis of customs duty had changed into an ad valorem regime, “transaction value” would necessarily mean the value at which the goods were to be purchased from the foreign supplier. Accordingly, the value mentioned in the bill of lading was to be considered. The petitioner preferred an appeal against the same before the SC. The SC stated that as per Rules 4 & 9 of Customs Valuation (determination of value of imported goods) Rules, 2007, unless goods are brought into India, the act of importation which triggers the levy does not take place and therefore, “it is the quantity of goods brought into India alone that attracts levy of import duty”. The SC held that when duty was demanded on pilfered quantity, Section 23 of the Customs Act 1962 was violated, which stipulates no duty on such quantity lost or damaged.
(Ref: Mangalore Refinery & Petrochemicals Ltd vs Commissioner of Customs, Mangalore)
The Gujrat High Court (HC) allowed utilization of CENVAT credit of one unit by another unit even in the absence of registration as an ‘Input Service Distributor’ (ISD).
The registered office of the assesse and their Vatva office were both located at the same place and appellant had simply utilized the credit at Vatva instead of distributing it to various other units. The honorable Tribunal had held that the assesse (i) was allowed to utilize CENVAT credit at multiple units even in the absence of ISD registration; and (ii) need not distribute it on pro rata basis. (It is to be noted that during the relevant period of dispute, there was no restriction on utilization of such credit without allocating proportionately to various units). The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that the appellant has not been benefitted by doing this. This decision was ratified by HC dismissing the appeal of the Department.
(Ref: Commissioner of Central Excise vs Dashion Limited)
Service tax law
The Mumbai Tribunal held that transmitting financial messages constitute 'information transfer and data-processing' and consequently are taxable as "banking services".
The Tribunal upheld the taxability of services received from ‘Society of Worldwide Interbank Financial Telecommunication’ (SWIFT), a non-resident entity, towards transmitting financial message resulting into foreign exchange remittance transactions as ‘Banking and other financial services’. The Tribunal rejected the claim of the assesse that in the impugned issue there was only transmission of message and not data processing, whereas the provision requires existence of both these element. The Tribunal analyzed the difference between Information and Data Processing and concluded that both these elements were present in the services rendered by SWIFT. The Tribunal also rejected the claim of mutuality of interest citing that fee was collected by SWIFT from its customers.
(Ref: Bank of Baroda vs Commissioner of Service tax, Mumbai - I)
The Mumbai Tribunal held that in the absence of a contrAct the SMS termination services would be taxable on issue of invoice or any other document containing necessary particulars.
The Tribunal ruled that in case of SMS termination services rendered by telecom operator (Vodafone) to other telecom operators, when there is no contract between the telecom operators for continuous supply of service requiring the recipient to make periodical payment, the tax would be payable in terms of erstwhile Rule 6(a) of Point of Taxation Rules, 2011. Hence, such services would be deemed to have been provided when invoice was issued in this regard. The Tribunal further observed that in the present case Vodafone had issued demand notes to the service recipients demanding payment of consideration and that letter contained all details. Hence, since the assesse complied with substantive provisions of Rule 4A of Service Tax Rules, 1994, the demand note shall be treated as ‘invoice’ and tax would be payable on that basis.
(Ref: Vodafone Cellular Limited vs Commissioner of Central Excise, Pune)
VAT / CST
The Gujarat High Court (HC) held that supply of Natural Gas to the Government was not liable to sales tax.
The Petitioner entered into a Production Sharing Contract (PSC) with the Government of India (GOI) for supply and sale of natural gas, which was initially explored and extracted from the Exclusive Economic Zone (EEZ) of India.
The main issue before the HC was to determine whether the sale of goods had actually taken place within the State of Gujarat and therefore being exigible to sales tax.
The HC observed that Gujarat State sales tax is not leviable if (i) the sale is in the course of inter-state trade or commerce; or (ii) the sale has taken place outside the state itself; or (iii) the sale has taken place in the course of import of goods into India. The court noted that these 3 eventualities are to ascertained in terms of the principles laid down in the Central Sales Tax Act 1956 (CST).
The HC noted that a sale can be said to take place outside the state if (i) the situs of the goods in case of ascertained goods, at the time of the contract of sale is outside the State or (ii) in case of unascertained or future goods, at the time of their appropriation to the contract of sale is outside the state.
On perusing the provisions of the PSC, the HC concluded that the goods in the present case were unascertained. Further, the HC enunciated the principles of sale of unascertained goods, and reading the same along with the PSC, concluded that the appropriation, delivery and passing of title of the goods all took place offshore, outside the State of Gujarat. The HC also rejected the contention that determination of the price taking place within the state cannot be the definitive test for holding that sale took place within the state. Being a sale outside the state, the transaction was held to be not liable to sales tax.
(Ref: B.G. Exploration and Production India Ltd. vs The State of Gujarat)
Delhi High Court (HC) held that pure labour contracts are outside 'works contract tax' purview and are not includible towards 'composition'.
In this case, the assessee was engaged in the business of executing pure labour contracts wherein skilled and unskilled labour was supplied for excavation work. In addition, the assessee also executed contracts which involved transfer of property in goods.
The issue before the HC was whether labour contracts are exigible to sales tax under the Delhi Sales Tax under the Works Contract Act 1999 (Act).The HC observed that the Act was enacted for levy and collection of tax on the transfer of property in goods whether as goods or in some other form involved in the execution of a works contract. The definition of works contract under the Act was an agreement for carrying out for cash or deferred payment the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement repairing or commissioning of any movable or immovable property but shall not include such contracts as may be prescribed.
After perusing the legislative scheme, the HC noted that it was never the intent to levy a tax on anything other than the value of the goods transferred whether as goods or in some other form in the execution of a works contract. The value of labour and services and other like charges were outside the ambit of taxable turnover. The HC also went on to hold that where their value is not clearly ascertainable, as in the case of a composite works contract the prescribed mechanism under the act has to be followed.
In conclusion and on the basis of facts, the HC held that pure labour contracts would not be subject to levy of tax as there was no transfer of property. However, where a composite works contract goods and services includes a demand of labour charges, service charges and the like, then the dealer would be liable to pay tax following the prescribed mechanism under the Act.
(Ref: HS Power Projects Pvt. Ltd. vs Commissioner of Trade and Taxes, Delhi)
The Andhra Pradesh High Court (HC) set aside levy of tax on stock transfer of goods against ‘Form F’ intended for exports through branch in another State.
In this case, the assesse had 2 offices viz., one at the Special Economic Zone, Cochin, and another in Secunderabad. The assesse was engaged in the business of trading chillies which was exported outside India through Cochin.
The Cochin branch, upon receipt of orders from intending foreign buyers would intimate the Secunderabad branch to purchase chillies of the required specification. The Secunderabad branch would accordingly purchases chillies, from unregistered and registered dealers under the Andhra Pradesh Value Added Tax Act 2005 (Act). These chillies were then despatched by way of stock transfer notes under the cover of Form ‘F’ to the Cochin branch for export.
Based on the above facts, the sales tax authorities sought to recover tax on the purchases made by the assessee from unregistered dealers under Section 4 of the act which covers tax payable in certain cases by the purchasing dealer. One of the conditions for levy of purchase tax under Section 4 is that the goods is not be exported outside India. It was stated by sales tax authorities that Section 4 was applicable especially in view of the fact that the goods were initially sent to a branch office and not immediately exported outside India.
The HC noted that the Secunderabad branch and the Cochin branch are not distinct and separate legal entities, but rather part of the same company. The HC noted that transfer of goods from one branch to the other is integrally required for movement of goods from Secunderabad which is occasioned by order placed by a foreign buyer. Therefore, the movement is integral to the export and the same would squarely fall in the exception to Section 4 of the Act.
In sum, it was held that no tax was payable on this transaction.
(Ref: A.B. Mauri India Pvt. Ltd. vs Deputy CTO, Hyderabad)
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