TMI BlogDraft Circular - Procedural issues in Service Tax-clarification regX X X X Extracts X X X X X X X X Extracts X X X X ..... les and the notifications; and (c) clarifying as well as prescribing the procedures to be followed for carrying out service tax administration. Over a period of time there have been significant changes in law and procedures. While certain circulars/clarification/ instructions have become redundant and anachronistic, new issues have arisen on account of changes in law and procedure. In view of these changes, a need was felt to re-examine the utility of these circulars/instructions. Accordingly, all these circulars/clarifications/ instructions issued by the Board [as also by the Director General (Service Tax)], since the introduction of Service Tax in 1994, have been reviewed. For this purpose, the Government engaged Shri T.R.Rustagi, Chief Commissioner (retired). A Report, dated 22.02.2007 submitted by Shri Rustagi, was placed on the official web-site for soliciting views/comments/suggestions from the trade and industry associations, officers from field formations and others stakeholders. The report as well as the responses were examined. In the first phase, a total of 48 circulars/instructions (which had become redundant or inconsistent with the exiting law and procedures) were wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided by him. 4.4 Further, input service distributor, which is an office of a manufacturer of excisable goods or taxable service provider for distribution of credit on input services, is also required to take separate service tax registration. 4.5 Application for registration is required to be made in Form ST-1 to the Superintendent of Central Excise/Service tax within 30 days of levy of service tax coming into effect on such taxable service, or in case the business is commenced after the levy coming into effect, the application for registration is required to be made within 30 days of commencement of business of providing a taxable service. A person providing more than one taxable service is required to take single registration. He should indicate all taxable services provided by him in Form ST-1. 4.6 Any person liable to pay service tax, who provides taxable service from more than one premises, can apply for centralized registration in respect of premise/ premises, where his centralized billing system or centralized accounting system in respect of taxable services provided by him, is /are located. Similarly, any other person, other than service provider, who is liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service tax, the duty paying challan should be filled complete in all respect. 5.3 E-payment of service tax: The service tax can be paid electronically also. For this purpose, the service taxpayer needs to have an account in any branch of the designated banks. For availing facility of e-payment, the service taxpayer will have to obtain a user-id and password from the bank in which he has the account. The procedure of e-payment is that the service taxpayer would log on to the web-site of the bank with his user-id and password. He will then choose the option of payment of service tax. On choosing this option, the service taxpayer will be guided to e-payment portal wherein he would be filling the challan for payment of service tax and would authorize payment of service tax by way of debit to his account. On submission, copy of acknowledgement and challans would be generated for the records of service taxpayer. 6. Mandatory e-payment of service tax 6.1 The e-payment of service tax has been made mandatory w.e.f. 1.10.2006, vide sub-rule (2) of rule 6 of the Service Tax Rules, 1994, for all assesses who have paid (in cash plus through CENVAT Credt) a service tax amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments: 7.1 The provisions relating to issuance of such documents, in respect of taxable service, are prescribed in rule 4A and 4B of the Service Tax Rules, 1994. The salient features are as under. 7.2 Every taxable service provider is required to issue a document (i.e. invoice, bill or challan) with in 14 days from either the date of completion of provision of service or receipt of any service charges (which ever is earlier). Such document should be serially numbered and should contain the name and address of service provider and service receiver, description and value of service provided and service tax payable thereon. 7.3 An input service distributor is also required to issue such a document in favour of the recipient of the credit distributed. This document should also be serially numbered and should give the details of the invoices under which the taxable service has been received, the name, address and registration of the input service distributor as well as the recipient of the credit. The amount of credit is also to be mentioned. 7.4 For banking, financial or other service providers, providing 'banking other financial services', certain relaxations are ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Service Tax Rules, 1994. The salient features are as under. 9.2 Every assessee is required to file a half yearly return in Form ST-3. This return, for the periods from April to September and October to March, is to be filed by the 25 th October and the 25 th April respectively. Further, 'Input Service Distributor' is also required to file this return. 9.3 The service tax return is required to be filed under Section 70 of the Act, by 'any person liable to pay the service tax'. Similarly, as per Rule 7 of the ST Rules, 1994, 'every service taxpayer' is required to submit service tax return. By definition, an 'assessee' is a person liable to pay service tax. Thus, persons, who are not liable to pay service tax (because of the exemption including threshold exemption), are also not required to file ST-3 returns. 9.4 E-filing of return- The service tax return can be filed electronically after logging into the website www.servicetaxefiling.com . For this purpose the assessee is required to obtain user-id and login password from department. For this purpose a simple application may be made to the jurisdictional Central Excise Officer, giving details of STC No. and an 'e-ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efund of service tax. 11. CENVAT Credit 11.1 With effect from 10.9.2004, CENVAT Credit across goods and services has been allowed. In this regard the manner of availing credit and the procedure to be followed is prescribed in the CENVAT Credit Rules, 2004 (herein after called 'the Credit Rules'). This circular deals with only certain commonly raised issues relating to certain provisions of these rules that relate to service tax credit, namely, (a) those pertaining to credit of service tax paid on taxable service i.e. 'transportation of goods by road'; and (b) eligibility to avail credit on service tax paid on mobile phones. The following are the issues have been examined in this circular,- (a) ISSUE: Whether a manufacturer or taxable service provider having credit balance in his account can utilize that credit for payment of service tax on goods transport by road, as a consignor or as a consignee. COMMENTS : In terms of rule 3 (4) of the Rules CENVAT credit can be utilized for the following payment of ,- (a) any duty of excise payable on any final product; (b) any amount payable while removing (i) inputs as such or in partially processed form or (ii) capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer of excisable goods or a provider of taxable service. (c) ISSUE; Up to what stage a manufacturer/consignor can take credit on the service tax paid on goods transport by road? COMMENTS: This issue has been examined in great detail by the CESTAT in the cases of M/s Gujarat Ambuja Cements Ltd. vs CCE, Ludhiana [2007 (006)STR 0249 Tri-D],. In this case CESTAT has held as follows, "the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of 'input services' take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The two clauses, one dealing with general provision and other dealing with a specific item, are not to be read disjunctively as to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expanded meaning of the expression 'place of removal', outward transportation upto the place of removal has been recognized as 'input service'. For illustration if the goods are first sold at the factory gate or depot and then the transportation is being undertaken for delivery of the goods at the destination. In such cases, the factory /depot would become the 'place of removal' and any transportation thereafter would be transportation beyond such 'place of removal'. As such no credit would be admissible on such outward freight. However, there are situations, where by way of the terms of contract a sale is in the nature of destination sales. In such cases, the ownership of the goods rests with the seller of the goods till the delivery of the goods to the purchaser at his door step. The seller not only bears the freight for such transportation but also suffers the risk of loss of or damage to the goods during transit to the destination. The terms of the contract for sale also makes it clear that the property in the goods would stand transferred upto the purchasers only when such goods are delivered in acceptable condition to the purchasers, and the purchasers accept such deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/guidelines issued by the Board, from time to time. Similarly, an audit party deputed by the Comptroller and Auditor General of India may also undertake audit of service tax assessee. The rule 5 of the Service tax Rules makes it mandatory for every assessee to make available the records, on demand, for inspection and examination to such authorized person/audit parties. 15. Adjudication of cases 15.1 Section 73 of the Act deals with the adjudication of cases of short levy or non levy of service tax or service tax short paid or not paid or erroneously refunded. For quick settlement of disputes, this section prescribes that (i) in cases other that those involving fraud, collusion, wilful mis-statement, suppression of fact or contravention of provisions of Act or rules made thereunder with intent to evade tax, the person chargeable to service tax, or to whom service tax has been erroneously refunded may make payment suo-moto along with interest, as applicable, and, consequently no Show Cause Notice would be served in respect of amount so paid; (ii) in other cases involving fraud, collusions, wilful mis-statement and suppression of facts, etc., the dispute could be settled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t involved is of the highest amount. 15.4 For cases where the appellate authority remands the case for de-novo adjudication specifically mentioning the authority that has to adjudicate the case, then such authority specified in the said appellate order should adjudicate such cases. Where the appellate authority does not specifically mention the authority who has to adjudicate the case, then it should be decided by the authority who passed the said remanded order. The above specified monetary limits are not applicable in such cases. 15.5 As decided earlier by the Board, in respect of issue involving Show Cause Notice for an amount of Rs one thousand and below, towards short payment/non-payment of service tax, the jurisdictional officer should give an opportunity and allow the service taxpayer to deposit the amount of service tax not paid alongwith interest, if any. In case the service provider pays the service tax alongwith interest within period of one month of the default in payment being pointed out, recourse should be made to section 80 of Finance Act, 1994 as amended provided the service taxpayer fulfils the conditions therein. However, in other cases of failure on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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