Indirect Taxes

Service Tax - Statute Update

Rajkamal Shah
CA.

1. Further exemption under Service Tax to the Merchant Exporters

The Government has amended Notification No. 41/2007-ST Dated 6-10-2007 by including few more services for the purpose of granting exemption to the exporters of goods. The exemption will be granted by way of refund of service tax paid on the following input services used for the purpose of export of goods.

This means the merchant exporters are eligible for grant of refund from 6-10-2007

Taxable Service	Relevant Section	Conditions
Custom House Agency’s Service	S. 65 (105)(h)	Certain documents to be produced like invoice of CHA, details of shipping bill, details of invoice of export of goods. Details of payment to CHA, details of other taxable service provided by CHA.
Banking or Other Financial Services	S. 65 (105)(zm)	Service should be in relation to collection of export bills, issue of Letter of Credit, advising commission, advising  amendment & confirmation charges. The exporter should produce evidence to link the use of specified services for export of goods.
Commission Agent’s Services (Business Auxiliary Service)	S. 65 (105)(zzb)	Agreement or contract for providing service by commission agent outside India in relation to export of goods The amount of commission to be declared in the shipping bill Commission should not be on export of   canalized item, project export or export    finance under line of credit extended by the Government of India or Exim Bank Export should not be made by Indian     partner towards equity participation in an  overseas JV or Wholly Owned Subsidiary Documents evidencing actual export of     goods and actual payment of commission to the Commission Agent to be provided Refund of service tax shall be restricted to actual amount of service tax paid or service tax paid or service tax calculated on 2% of FOB value of export whichever is lower.

The conditions and procedures for grant of refund is provided in Notification No. 41/2007-ST. The details are given in October issue of Income Tax Review.

(Notification No. 17/2008-ST dtd. 1-4-2008)

2. Adjudication of penalty

Powers of the Joint Commissioners are extended for the purpose of adjudication of penalty under service tax. The Joint Commissioner now have power to adjudicate penalty above Rs. 5 lakhs and upto Rs. 50 lakhs like that of Additional Commissioner.

(Notification No. 16/2008-ST dtd. 11-3-2008 & Circular No. 99/2/2008-ST dtd. 11-3-2008)

3. Guidelines are issued for publication of names u/s.73D r.w. Service Tax (Publications of Names) Rules, 2008, if necessary of expedient in public interest

1. in case of first offence where service tax liability is Rs.1 crore or more and in case of repetitive offence Rs. 25 lakhs

2. there should be material evidence to show that fraud, collusion, wilful mis-statement or suppression of facts with intend to evade payment of tax.

The Board has clarified that these provisions are stringent in nature and may affect the reputation of a person. Therefore, these should be used sparingly, with due care and caution. At the same time, it has also to be ensured that in deserving cases, they are, in fact, used and that there is no arbitrary selection in their implementation.
(Circular No. 100/3/2008-ST dated 12-3-2008)

4. Displeasure of the Board against Commissioners issuing Standing Order relating to service tax, contrary to the clarification/ circular issued by the Board

The Board has instructed that when an officer has different view point on any clarification/ circular issued by the Board, the appropriate course for the officer is to take up the matter through the Chief Commissioner with the Board indicating his views, comments or suggestions for necessary action instead of issuing a Standing Order, suo motu contrary to instructions issued by the Board.

(Letter F. No. 345/2008-TRU dated 11-3-2008)