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Important Updates under Excise - October 2014

1. Board has come up with the clarity that, determination of “place of removal” which is    recently defined in Cenvat Credit Rules 2004., inserted by way of notification no 21/2014 C.E (NT) dated 11.07.2014. Few issues clarified vide this circular are:-

a. As the definition is now provided in the CCR, wherever Cenvat credit is available upto the place of removal, this definition of place of removal would apply, irrespective of the nature of assessment of duty.

b. As regards ascertainment of place of removal is that the place where sale takes place is the place of removal. The place where sale has taken place is the place where the transfer in property of goods takes place from the seller to the buyer. This can be decided as per the provisions of the Sale of Goods Act, 1930 as held by Hon’ble Tribunal in case of Associated Strips Ltd Vs Commissioner of Central Excise , New Delhi [2002 (143) ELT 131 ( Tri-Del )] . This principle was upheld by the Hon’ble Supreme Court in case of M/s. Escorts JCB Limited v. CCE, New Delhi [2002 (146) E.L.T. 31 (S.C.)

Finally the board concluded that place of removal needs to be ascertained in term of provisions of Central Excise Act, 1944 read with provisions of the Sale of Goods Act, 1930. Payment of transport, inclusion of transport charges in value, payment of insurance or who bears the risk are not the relevant considerations to ascertain the place of removal. The place where sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal.

For detailed view of circular, follow the reproduced link http://www.cbec.gov.in/excise/cx-circulars/cx-circ14/988-2014cx.htm

2) The judgment of M/s Travelite (India) [2014-TIOL-1304-HC-DEL-ST] wherein the Hon’ble court has held that the powers to conduct audit as envisaged in rule 5A (2) of the Service Tax Rules, 1994, does not have appropriate statutory backing and therefore quashed the rule. The board has clarified that for Central Excise there is adequate statutory backing for audit by the Central Excise Officers. The statutory provision relevant for audit is clause (x) of Section 37(2) and rule 22 of the Central Excise Rules, 2002.

This circular confirms that ST audits are not valid in law.

For detailed view of circular, follow the reproduced link

http://www.cbec.gov.in/excise/cx-circulars/cx-circ14/986-2014cx.htm

Update under Service tax- October -14

An order is been passed vide number 02/2014 – Service Tax dated 24th October 2014. To extend the date of submission of form ST – 3 for the period of April – 2014 to September 2014 till 14th November 2014.

For more details log on

It is clarified that agents involved in Money Transfer Service Operators would fall under the ambit of service tax?

Board has clarified taxability of service tax under given situations presented in table form

Whether service tax is payable on remittance received in India from abroad?

No service tax is payable per se on the amount of foreign currency remitted to India from overseas. As the remittance comprises money, it does not in itself constitute any service in terms of the definition of ‘service’ as contained in clause (44) of section 65B of the Finance Act 1994.

Whether the service of an agent or the representation service provided by an Indian entity/ bank to a foreign money transfer service operator (MTSO) in relation to money transfer falls in the category of intermediary service?

Yes. The Indian bank or other entity acting as an agent to MTSO in relation to money facilitates in the delivery of the remittance to the beneficiary in India. In performing this service, the Indian Bank/entity facilitates the provision of Money transfer Service by the MTSO to a beneficiary in India. For their service, agent receives commission or fee. Hence, the agent falls in the category of intermediary as defined in rule 2(f) of the Place of Provision of Service Rules, 2012.

Whether service tax is leviable on the service provided, as mentioned in point 2 above, by an intermediary/agent located in India (in taxable territory) to MTSOs located outside India?

Service provided by an intermediary is covered by rule 9 (c) of the Place of Provision of Service Rules, 2012. As per this rule, the place of provision of service is the location of service provider. Hence, service provided by an agent, located in India (in taxable territory), to MTSO is liable to service tax.

The value of intermediary service provided by the agent to MTSO is the commission or fee or any similar amount, by whatever name called, received by it from MTSO and service tax is payable on such commission or fee.

Whether service tax would apply on the amount charged separately, if any, by the Indian bank/entity/agent/sub-agent from the person who receives remittance in the taxable territory, for the service provided by such Indian bank/entity/agent/sub-agent

Yes. As the service is provided by Indian bank/entity/agent/sub-agent to a person located in taxable territory, the Place of Provision is in the taxable territory. Therefore, service tax is payable on amount charged separately, if any.

Whether service tax would apply on the services provided by way of currency conversion by a bank /entity located in India (in the taxable territory) to the recipient of remittance in India?

Any activity of money changing comprises an independent taxable activity. Therefore, service tax applies on currency conversion in such cases in terms of the Service Tax (Determination of Value) Rules. Service provider has an option to pay service tax at prescribed rates in terms of Rule 6(7B) of the Service Tax Rules 1994.

Whether services provided by sub-agents to such Indian Bank/entity located in the taxable territory in relation to money transfer is leviable to service tax?

Sub-agents also fall in the category of intermediary. Therefore, service tax is payable on commission received by sub-agents from Indian bank/entity.

For more details, readers may follow the reproduced link

For detailed information, readers are suggested to visit www.cbec.gov.in

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