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CA Sandesh Mundra

Consult Us For Construction

Service Tax Updates – January 2012

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1)      Vide Notification No. 1/2012 Dated 9th Jan, 2012, Central Board of Excise and Customs has extended  the date of submission of half yearly return for the period April 2011 to September 2011, from 6th January 2012 to 20th January 2012.


2)      Vide Notification No. 52/2011 Dated 30th Dec, 2011, the Central Government, hereby exempts the specified taxable services, received by an exporter of goods and used for export of goods, from the whole of the service tax leviable thereon, subject to the specified conditions: Provided that–

(a) the exemption shall be provided by way of refund of service tax  paid on the specified services used for export of the said goods;

(b) the exemption shall be claimed at specified rates.

(c) no CENVAT credit has been taken;

(d) the exemption shall not be claimed by a Unit or Developer of SEZ;


Latest Case Laws on service tax impacting the construction / EPC sector -

1)      Cable Laying – Lower authorities confirmed demand of service tax on assessee for laying cables – Assessee submitted that authorities below did not have benefit of clarification uissued vide Board’s Circular No. 123/5/20210-TRU, dated 24-5-2010 which has been issued at a subsequent point of time and which, inter alia, clarified that laying cables under or alongside road is not a taxable service. Held that the impugned order to be set aside and matter to be remanded to original authority for fresh decision. – Upadhaya Enterprises v. CCE (New Delhi – CESTAT).


2)      Consulting Engineer – Assessee had provided certain technology services to its client before commencement of its commercial production, i.e. 1-3-1996 – Consideration for that service was received after 7-7-1997 – Service tax was demanded by the original authority on ground that service provided by assessee was consulting engineer service which was liable to service tax with effect from 7-7-1997 – On appeal, Com ( Appeals) upheld decision of original authority – However, there was no evidence on record to suggest that consulting engineering service was provided after 1-3-1996 and also continued after 7-7-1997 – Held that since service provided was before date of commencement of law to tax consulting engineering services and there was no evidence on record to show that consulting engineering service was provided during impugned period, appeal of the assessee was to be allowed.  – Hindustan Colas Ltd v. CCE (Mum – CESTAT).


3)      Erectioning Commissioning and Installation Service – Period 1-7-2003 to 31-7-2006 – Assessee was sub-contractor for “B” =- Service Tax demand was confirmed on assessee for relevant period under category of, “Erection, commissioning or installation service” – Assessee admitted liability for period from 10-9-2004 and paid same – As regards for period prior to 10-9-2004, assessee submitted that it was only required to erect machinery whereas installation and commissioning was done by the main contractor, further it was not liable to pay service tax on amount received from main contractor for erection in as much as erection was not part of its service prior to 10-9-2004 – Held that since for the period prior to 10-9-2004, assessee’s liability to pay service tax on erection part of work covered by contract was debatable, pre-deposit requirement for period prior to 10-9-2004 was to be waived and matter was to be remanded for reconsideration. – Kurup Engg. Co. P Ltd v. CCE (Mum  - CESTAT).


4)      Management, Maintenance and Repair Service – Stay Order – Under an agreement, assessee had provided certain service to Tamil Nadu Water supply and Drainage Board (TWAD), but had not paid any service tax – In Impugned order, it was held that as an assessee’s work was a composite maintenance contract, it was liable to pay service tax from 1-7-2003 under head ‘Repaid and maintenance service’ – Assessee’s case was that whole of plant had been handed over to it for seven years and, thus, it had become its asset on which it claimed depreciation and, hence, it could not be said that it was providing alleged service – However, revenue submitted tat assessee was handed over desalination plant by TWAD and it was required to ensure specific quantum of water supply from said plant and payment was made on basis of water supply and, therefore, that was nothing but a maintenance and repair contract – Whether since a final decision could be arrived at only after agreement between parties was examined in detail and other legal aspects were considered, assessee was to be directed to deposit part of service tax amount and balance amounts of service tax, interest, penalty were to be waived. -   Doshion Ltd v. CST (Ahd - CESTAT)


5)       Export Refund - In the case of Wipro BPO Solutions Ltd v. Com of Service Tax, Hon’ CESTAT – New Delhi Bench has held that person providing taxable services would be liable to obtain service tax registration only if he was liable to pay service tax. Thus rebate claimed under Rule 5 or Not No. 12/2005 can-not be rejected just because the assessee did not have service tax registration.


6)      Service Tax on Advance Receipts - In the case of Vigyan Gurukul v. CCE, Jaipur, Hon’ CESTAT – New Delhi Bench has held that the rate of service tax applicable at the time of receipt of value of service tax will apply on the amount received as advance for service to be rendered and billed subsequently.


7)      VAT vs Service Tax - In the case of State of AP v. BSNL, Hon’ AP High Court has held that amounts received towards SIM cards, Recharge Coupons, Mobile Telephone Rentals on post paid connections, proceeds received on sharing of infrastructure can-not be subjected to tax under AP VAT Act, 2005 and would fall within the ambit of Telecommunication services. Several other issues related to Works Contract have been discussed in the judgement.

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CA Sandesh Mundra, Consultant – Management Audit and Indirect Taxation - Chartered Accountant, Diploma in Information System Audit, Diploma in Insurance & Risk Management , Certificate from ICAI on International Financial Reporting Standards. Actively associated with clients in the industrial construction sector since last 9 years.He possesses special skills in structuring the indirect tax component of the works contracts and as management auditor, has visited several construction sites in various states like Orissa, Rajasthan, Gujarat, Maharasthra, Madhya Pradesh etc. During the course of said visits he has been to very large industrial complexes, refineries, power plants etc


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