amendments

5/24/2018 Amendments

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KS: The Tax-Age VIVEK SONI

1

RECENT AMENDMENTS TO INDIRECT TAXESFOR CA FINAL

1. THIS AMENDMENT NOTES COVERS RELEVANT AMENDMENTS MADE BY THE FINANCE ACT,2013 AND RELEVANT NOTIFICATIONS & CIRCULARS ISSUED BETWEEN 1.5.2013 TO 31.10.2013.

It must be carefully noted that for students appearing in May-14 Exam, the amendments made by the Finance Act,

2013 and the amendments made by the notifications, circulars and other legislations up to 31-10-2013 are relevant.

2. Reasonable efforts have been made in this notes to avoid errors and omissions. Inspite of this

errors/omissions may creep in. It is, therefore, notified that the author/ publisher does not take any

responsibility for any damage or Loss of action to any one, of any kind, in any manner. It is advised that

the readers should cross check the facts, Laws and contents of the publication with the original Govt.

publications and notifications.

3. Tax Laws are a subject matter of opinion and interpretations. Same provisions and case Laws may be

interpreted in different ways. It is advised that the readers/students should form their own opinion based

on class discussions, discussions contained in this book and original Govt. publications and notifications.

4. These notes should not be read in isolation. It has to be read along with class discussions and dictations.

This notes contains the discussions which, in the opinion of the author, are relevant for class discussions

and examinations. It should be supplemented with the ICAI study material provided to the students and

the original Govt. publications and notifications.

5. For good performance in examinations, students should solve past examination papers and practice

manual of ICAI.

----------------------------------------------------------------------------------------------------------------------INDEX

TOPICS PAGE

AMENDMENTS MADE BY THE FINANCE ACT, 2013 02 - 13

AMENDMENTS MADE THROUGH NOTIFICATIONS& CIRCULARSISSUED BETWEEN 01.05.2013 TO 31.10.2013 14 - 21

REVISIONARY TEST PAPER [SERVICE TAX] 21 - 30

RELEVANT CASE LAWS 33 - 48

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AMENDMENT MADE BY THE FINANCE ACT, 2013 [W.E.F 10.05.2013]

CENTRAL EXCISE

Offences and Prosecutions [Section 9 & 9A, Section 20 & 21]

(1) Section 9: Imprisonment attract where duty evasion exceeds ` 50 lakhs instead of earlier ` 30 lakhs.[similar amendments has also been made u/s. 135 of customs][w.e.f 10.5.2013 by vir tue of amendment made

by the F inance Act, 2013]

Section 9(1)Whoever commits any of the following offences, namely:-

Point (a) to (d): no change

(i) in the case of an offence relating to any excisable goods, the duty leviable thereon under this Act exceed

30 lakhs 50 lakhs with imprisonment for a term which may extend to 7 years and with fine. Howeverin the

absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such

imprisonment shall not be for a term of less than 6 months;

(ii) in any other case, with imprisonment for a term which may extend to 3 years or with fine or with both.

[only relevant extracts, no charges in other provisions]

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(2)Section 9Ahas been substituted with a new section to nullify the case law of Om Prakash, where the Apex

Court was held that all offences under Central Excise are non-cognizable and bailable. [w.e.f 10.5.2013].

Now, only following offenses are cognizable and non-bailable if the duty liability exceeds`50 lakh(i) evasion of payment of duty; or (ii) contravention of provision of Central Excise.

All other offenses are non-cognizable and bailable.

CERTAIN OFFENCES TO BE NON-COGNIZABLE [SECTION 9A]

1. Section 9A(1): in case offences are punishable under clause(b) or clause(bbbb) of section 9(1) and duty

liability exceeds ` 50 lakhs, they shall be cognizable and non-bailable. All other offences would be non-cognizable.

2. cognizable offences to be non-bailable:

i) Every person arrested under Central Excise Act to be forwarded, without delay to- (i) the nearest Central

Excise Officer (empowered to send persons so arrested to a Magistrate); or (ii) to the officer in charge of the

nearest police station if there is no such Central Excise Officer within a reasonable distance. [section 19]

ii) Section 20 provides that a person can be admitted to bail by officer in charge of the police station only in

respect of offences which is non-cognizable.

iii) Section 21 provides that the provisions relating to release of arrested persons on bail or personal bond by

the nearest Central Excise Officer have been made applicable only to non-cognizable offences.

Note:i) cognizable offences: is a criminal offence in which the police is empowered to register an FIR, investigate, and arrestan accused without a court issued warrant.

ii) non-cognizable offences: is an offence in which police can neither register an FIR, investigate, nor effect arrestwithout the express permission or directions from the court.

Note:No changes in section 9A(2): Compounding of offences

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SECTION 11/ SECTION 142: RECOVERY OF SUMS DUE TO THE GOVERNMENT

(3) Section 11(1): Power of recovery extends to a Central Excise officer/ proper officer authorized u/s. 142 of

customs:

Earlier, only an officer empowered by CBEC was authorized to recover the excise duty. However, with effectfrom 10.05.2013, the officer empowered by the CBEC may also require the following two categories of

officers to recover excise duty:

(i) A Central Excise Officer; or

(ii) A proper officer authorized to recover the sums due from the Government under section 142 of the

Customs Act, 1962.

Section 11(1):

(1)The officer empowered by the CBEC to levy such duty or require the payment of such sums may deductthe amount so payable from any money owing to the person, or may recover the amount

"may deduct or require any other Central Excise Officer or a proper officer referred to in section

142 of the Customs Act, 1962 to deduct the amount so payable from any money owing to the personfrom whom such sums may be recoverable or due which may be in his hands or under his disposal

or control or may be in the hands or under disposal or control of such other officer, or may recover

the amountby attachment and sale of excisable goods belonging to such person; and

[No changes in all other provisions]

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(4) New sub section (2) has been inserted w.e.f 10.5.2013 to strengthened the recovery mechanism:

Money due to the Government may now be recovered from any person other than from whom money is due

after giving proper notice, if that other person holds money for/on account of the first person - Garnishee

Proceedings [Section 11(2) inserted]

Note: Similar amendments has also been made u/s. 142 of Customs]

Section 11(2):

Issue of Notice:(i) The Central Excise Officer may, by a notice in writing against the following person, require to pay to the

credit of the Central Government so much of the money as is sufficient to pay the amount due from such

person or the whole of the money when it is equal to or less than that amount :

- any other person from whom money is due to such person, or may become due to such person, or

- who holds or may subsequently hold money for or on account of such person,

The money must be paid either forthwith upon the money becoming due or being held, or at or within the time

specified in the notice, not being before the money becomes due or is held.

(ii) every person to whom a notice is issued under this sub-section shall be bound to comply with such notice,

and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not

be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any

entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or

requirement to the contrary;

(iii) in a case where the person to whom a notice under this sub-section has been issued, fails to make the

payment in pursuance thereof to the Central Government, he shall be deemed to be a person from whom duty

and any other sums of any kind payable to the Central Government under any of the provisions of this Act orthe rules made thereunder have become due, in respect of the amount specified in the notice and all the

consequences under this Act shall follow.".---------------------------------------------------------------------------------------------------------------


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RECOVERY OF DUTIES [SEC. 11A/ SEC. 28]

(5) Where any notice u/s. 11A has been issued, then subsequent to serve of such notice, the department can

serve a statement containing details of non/short payment, short/non levy or erroneous refund of duty etc. and

it should be deemed to be a service of show cause notice provided the grounds relied upon for the subsequent

period are the same as are mentioned in the earlier notice(s).

-------------------------------------------------------------------------------------------------------------------------------------(6)Section 28: under customs no recovery proceedings started if the amount of custom duty involved is less

than`100.-------------------------------------------------------------------------------------------------------------------------------------PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES [SECTION 11DDA/28BA]

(6) Earlier, provisional attachment of property can only be invoked against SCN served u/s. 11A(1) and

11D(2), now, Section 11DDA can be invoked for any notice serve u/s 11A [whether under sub-section (1) or

(2) or (3) or (4)].

[Customs: Similar amendments has been made u/s. 28BA i.e, now notice serve u/s. 28(4) shall also be liablefor provisional attachment along with notice served u/s. 28(1)]

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ADVANCE RULING

(7) Scope of application extended [Section 23A]: earlier only proposed activity can be covered. Now, existing

producer or manufacturer may seek advance ruling at the time of starting new line of business. [Similar

amendments have been made under customs i.e, existing importer/exporter can seek advance ruling at the time

of undertaking a new business of import or export]. [This amendment nullify the ruling of oracle India Pvt. Ltd

DEFINITIONS [SEC. 23A (Excise) /SEC. 28E (Customs)]activity means production or manufacture of goods and includes any new business of production or

manufacture proposed to be undertaken by the existing producer or manufacturer, as the case may be;

[For excise]

"activity" means import or export and includes any new business of import or export proposed to be

undertaken by the existing importer or exporter, as the case may be;'. [For customs]

(8) advance ruling sought[Section 23C]: earlier, it was sought only in respect of CENVAT credit of inputs and

capital goods, now it can also sought w.r.t CENVAT credit of input service.

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CESTAT

(9)3rdproviso to section 35C(2A)/129B(2A): CESTAT can extend further 185 days the period of stay. [total

stay 180 +185 days]

Only relevant extracts:

The Appellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a period of 3

years from the date on which appeal was filed .

Howeverwhere an order of stay is made in any proceeding relating to an appeal filed before the Appellate

Tribunal, then such an appeal is to be disposed by the Appellate Tribunal within 180 days from the date of

such stay order. If the appeal is not disposed off within the said period of 180 days then the stay order shallstand vacated.


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"Provided also that where such appeal is not disposed of within 180 days, the Appellate Tribunal may,

on an application made in this behalf by a party and on being satisfied that the delay in disposing of the

appeal is not attributable to such party, extend the period of stay to such further period, as it thinks fit,

not exceeding 185 days, and in case the appeal is not so disposed of within the total period of 365 days

from the date of initial stay order, then the stay order shall stand vacated on the expiry of the said

period. [ Section 35C(2A)/129B(2A) newly inserted by the Finance Act, 2013]

-------------------------------------------------------------------------------------------------------------------------------------(10) Section 35D(3)/129C(4): Monetary limit to hear and dispose of appeal by the single bench of CESTAT

has been increased from`10 lakh to`50 lakh.

Customs: Similar amendments under customsSection 129B(2A), 129C(4)

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Service of decision/order/summons etc. [Section 37C](11) A decision, order, summons or notice can be served by any of the following modes of delivery: -

a) by tendering [physical delivery]b) by registered post with acknowledgment due orc) by speed post with proof of delivery or by courier approved by the CBEC. [newly inserted]

-------------------------------------------------------------------------------------------------------------------------------------(12) person who has committed offence under the Finance Act, 1994 also disqualified to act as authorized

representative under customs [Section 146A(4)(b)]

CUSTOMS

(1)Section 29: Landing of vessels and aircraft may be at any place other than custom port/aircraft as permitted

by CBEC.

SECTION 29: ARRIVAL OF VESSELS AND AIRCRAFTS IN INDIA [only relevant extract](1) The person-in-charge of a vessel or an aircraft entering India from any place outside India shall not cause

or permit the vessel or aircraft to call or land -

(a) for the first time after arrival in India; or

(b) at any time while it is carrying passengers or cargo brought in that vessel or aircraft;

at any place other than a customs port or a customs airport, as the case may be,unless permi tted by the Board.

Earlier, vessels or aircraft cannot be landed other than a custom port or a custom airport. Now, The Finance

Act, 2013 has amended section 29(1) to empower CBEC to permit landing of vessels and aircrafts at any place

other than customs port or customs airport.

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(2) Section 30: E- filing of import general manifest is mandatory except cases allowed by commissioner.

(3) Section 40: E- filing of Export general manifest is mandatory except cases allowed by commissioner.

e-filing of IGM/EGM: earlier, import/export manifest was submitted manually. Now, Section 30(1) and section

41(1) have been amended vide the Finance Act, 2013 to provide for the mandatory electronic filing of the importmanifest and export manifest respectively. However, in cases where it is not feasible to deliver import/export manifest bypresenting them electronically, the Commissioner of Customs may, allow the same to be delivered in any other manner.

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(4) Section 47: import duty must be paid within 5 days 2 days without interest.

Section 47(2) Where the importer fails to pay the import duty within 5 days 2 daysexcluding holidays fromthe date on which the bill of entry is returned to him for payment of duty, he shall pay interest @ 15% p.a.

such duty till the date of payment of the said duty. [only relevant extracts]

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(5) Section 49: storage period of goods without warehousing is restricted to 30 days . further, extension given

30 days. [earlier there was no such restriction]

Earlier, no time-period had been specified under section 49 for which imported goods could be stored in a

warehouse.

Section 49 has been amended to introduce a time limit of 30 daysfor storage of goods in a warehouse in theinterest of accountability and early finalization of assessments. However, the Commissioner of Customs may

extend the period of storage for a further period not exceeding 30 days at a time.

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(6) Section 69: Warehouse goods cleared for exportation: Any warehoused goods may be exported to a place

outside India without payment of import duty if -

(a) a shipping bill or a bill of export in the prescribed form or a label/declaration accompanying the goods

as referred to in section 82 [postal export] has been presented in respect of such goods.".

[relevant extracts]

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(7) Section 27: Refund of import duty: No refund u/s. 27(1) shall be given if the amount is less than `100.-------------------------------------------------------------------------------------------------------------------------------------

(8) Section 135:Similar amendment as u/s. 9 of Excise: offences would be punishable with an imprisonment

upto 7 years and with fine, in case evasion of duty is more than `50 lakh, fraudulently availed duty drawbackor other export exemption of more than`50 lakh [ earlier the limit was`30 lakh]

Section 135 [only relevant extracts]

in the case of an offence relating to, -

any goods the market price of which exceeds`1 crore; or the evasion or attempted evasion of duty exceeding` 30 lakh`50 lakh; or such categories of prohibited goods as the Central Government may, by notification in the Official gazette,

specify; or

fraudulently availing of or attempting to avail of drawback or any exemption from duty, if the amount ofdrawback or exemption from duty exceeds`30 lakh `50 lakh,

shall be punishable, with imprisonment for a term which may extend to 7 years and with fine:

However, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, suchimprisonment shall not be for less than 1 year;

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(9) Section 104:power of arrest: certain offences under customs are non-bailable.

Only relevant extractsSub-section (6): Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the offences

under the Act shall be bailable.

The following offences are non-bailable and all others offences are bailable-

Sub section (6): [substituted]

Non-bailable offences: An offences punishable u/s. 135 w.r.t

(i) evasion or attempt evasion of duty exceeding`50 lakhs; or

(ii) prohibited goods notified u/s 11 which are also notified u/s. 135(1)(i)(c); or

(iii) import/export of any goods which have not been declared in accordance with the provisions of this Act

and the market price of which exceeds`1 crores; or


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(iv) fraudulently availing of or attempt to avail of drawback or any exemption from duty provided under this

Act, if the amount of drawback or exemption from duty exceeds`50 lakh,shall be non-bailable offences.

Sub section(7): newly inserted

Save as otherwise provided in sub-section (6), all other offences under this Act shall be bailable.".-------------------------------------------------------------------------------------------------------------------------------------

(10) Section 143A:Option for duty deferment for adjustment of duty payable against drawback has been deleted.-------------------------------------------------------------------------------------------------------------------------------------

(11) Section 144(3): There shall be no duty liability on a sample of goods consumed/destroyed during the

course of testing/examination.

Removal of duty liability on any sample of goods consumed/destroyed during the course of

testing/examination [Section 144(3)]

Earlier, section 144(3) stipulated that no duty shall be chargeable on any sample of goods taken under this

section which is consumed or destroyed during the course of any test or examination thereof, if such duty

amounts to`5 or more.-------------------------------------------------------------------------------------------------------------------------------------

(12) Section 146: Customs house agent has been renamed as custom broker under the Customs Act.

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(13) Section 147:liability of agents of the owner/importer/exporter has been enhanced.

Liability of principal and agent [Section 147]

(1) Where this Act requires anything to be done by the principal (i.e, owner, importer or exporter of any goods), it maybe done on this behalf by his agent.

(2) Any such thing done by an agent shall, unless the contrary is proved, be deemed to have been done with theknowledge and consent of the principal, so that in any proceedings under this Act, the principal, of the goods shall alsobe liable as if the things had been done by him.

(3) When any person is expressly or impliedly authorised by the principal to be his agent then such person shall,

without prejudice to the liability of the principal be deemed to be the principal.

However, where any duty is not levied or short-levied or erroneously refunded on account of any reason other than anywillful act, negligence or default of the agent, such duty shall not be recovered from the agent unless in the opinion of

Assistant/Deputy Commissioner of Customs the same cannot be recovered from the principal.

Note: Finance Act, 2013 has amended sub-section (3) of section 147 whereby now, an agent has equalresponsibility for making correct self-assessment.

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(14) Section 11:Power to prohibit importation or exportation of goods: The section has been amended to prohibit

import/export of goods in order to protect designs and geographical indications of goods also alonwith patents,

trademarks and copyrights.


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SERVICE TAX

(1)New section 66BA, introduced to provide that reference of old chargeability section 66 in the Finance Act,

1994, must be read as reference to section 66B (new chargeability section) w.e.f 1.7.2012.

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(2) Negative List:

(i) Section 65B(11):Definition of approved vocational education courses amended to include courses offered

by ITI/ITC affiliated to State Council of Vocational Training in designated trades. Further, amendment has

been made to exclude courses run by an institute affiliated to NSDC from the definition of vocation education

courses.

[w.e.f 10.5.2013]

Consider the following:

1) Vocational training courses provided by ITI/ITC

affiliated to State Council of Vocation Training

Before 10.5.2013: Taxable.

From 10.5.2013: Not taxable (covered in Negative

List)

2) Courses run by institute affiliated to the National

Skill Development Corporation

Before 10.5.2013: Not taxable

From 10.5.2013: Taxable. However, w.e.f

10.9.2013, services provided by Nation Skill

Development Corporation shall be covered in the

Mega Exemption.

SECTION 65B 11) PPROVED VOC TION L EDUC TION COURSEMEANS,-(i) a course run by an industrial training institute (ITI) or an industrial training centre (ITC) affiliated to the National

Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notifiedunder the Apprentices Act, 1961; or(ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person

registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment;

(iii) a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of

India; [w.e.f 10.5.2013, by the Amendments made by the Finance Act, 2013]

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(ii)Section 65B(40): Definition of any process amounting to manufacture has been amended to include goods

manufactured under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.

Any process amounting to manufacture or production of goods on which excise duty is leviable whether under Central

Excise Act, 1944; or the Medicinal and Toilet Preparations Excise Duties) Act, 1955or under State Excise Act. (It is tobe noted that manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and

narcotics are subjected to State Excise duties)-------------------------------------------------------------------------------------------------------------------------------------

(iii) Services relating to agriculture or agricultural produce: includes

- agricultural operations directly related to production of any agricultural produce including cultivation, harvesting,threshing, plant protection or seed testing. [Earlier only seed testing was not taxable, now all type of testingrelating to agriculture are not taxable]

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(3)Penalty & prosecutions

(i) Section 77: failure to obtain registration, amount of penalty amended to fix a maximum penalty of`10,000[ Daily penalty of`200 has been withdrawn w.e.f 10.52013]


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Section

77

(1) Failure to take

registration as per provisions

of section 69 or rules made

under this Chapter

Penalty which may extend to

Before 10.5.2013: (a)` 200 for every day during which suchfailure continues starting with the first day after the due date, till

the date of actual compliance, or, (b) `10,000, whichever ishigher.

On or after 10.5.2013: Maximum`10,000.

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(ii) Section 78A: new section inserted for levying personal penalty on directors upto `1,00,000 in case ofcompany in default.

Where a company has committed any of the following contraventions, namely:-

(a) evasion of service tax; or

(b) issuance of invoice in violation of the rules made under the provisions of this Chapter; or

(c) availment and utilisation of CENVAT wrongly or

(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six

months from the date on which such payment becomes due,

then any director, manager, secretary or other officer of such company, who at the time of such contravention was in

charge of, and was responsible to, the company for the conduct of business of such company and was knowingly

concerned with such contravention, shall be liable to a penalty which may extend to one lakh rupees."; [Newly insertedby the Finance Act 2013]-------------------------------------------------------------------------------------------------------------------------------------

(4) Offences & prosecutions [Section 89,90,91]: newly inserted

SECTION 89: OFFENCES AND PENALTIESOFFENCES Imprisonment

(a) knowingly evades the payment of service

tax under this Chapter; or(b) avails and utilises credit of taxes or duty

without actual receipt of taxable service orexcisable goods either fully or partially in violation

of the rules made under the provisions of this

Chapter; or

(c) maintains false books of account or fails to

supply any information which he is required to

supply under this Chapter or the rules made

thereunder or supplies false information (unless

with a reasonable belief, the burden of proving

which shall be upon him, that the information

supplied by him is true); or

(i)For offence specified in clause (a),(b),(c)

where the amount exceeds ` 50 lakh -imprisonment for a term which may extend to 3

years; Provided that in the absence of special and

adequate reasons to the contrary to be recorded in the

judgment of the court, such imprisonment shall notbe for a term of less than 6 months;

Further, for the second and every subsequent

offences, the imprisonment may extend to 3 years.

[Section 89(1)(i)]

(d) collects any amount as service tax but fails to

pay the amount so collected to the credit of the

Central Government beyond a period of 6 months

(ii)In the case of the offence specified in clause (d),

where the amount exceeds `50 lakh:imprisonmentfor a term which may extend to 7 years. However, in


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from the date on which such payment becomes due.

[This is a cognizable offence and all other offencesunder service tax shall be non-cognizable and billable]

the absence of special and adequate reasons to the

contrary to be recorded in the judgment of the court,

such imprisonment shall not be for a term of less than

6 months; [The Finance Act, 2013, increased

maximum imprisonment from 3 years to 7 years]

Further, for the second and every subsequentoffences, the imprisonment may extend to 7 years.

[Section 89(1)(ii)]

In the case of any other offences [ For example in

all of the above cases, where the amount does not

exceeds`50 lakh]

(iii) Imprisonment for a term which may extend to 1

year.

Further, for the second and every subsequent

offences, the imprisonment may extend to 3 years.

[Section 89(1)(iii)]

(3)The following shall not be considered as special and adequate reasons for awarding a sentence ofimprisonment for a term of less than 6 months, namely:same as in Excise Section 9

(4)A person shall not be prosecuted for any offence under this section except with the previous sanction of the

Chief Commissioner of Central Excise.

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SECTION 90: COGNIZANCE OF OFFENCES

[Newly inserted by the Finance Act, 2013]

(1) An offence under clause (ii) of sub-section (l) of section 89 shall be cognizable.

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences, except the

offences specified in sub-section (l), shall be non-cognizable and bailable.

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SECTION 91: POWER TO ARREST

[Newly inserted by the Finance Act, 2013]

(1) If the Commissioner of Central Excise has reason to believe that any person has committed an offence

specified in clause (i) or clause (ii) of sub-section (l) of section 89, he may, by general or special order,

authorise any officer of Central Excise, not below the rank of Superintendent of Central Excise, to arrest such

person.

(2) Where a person is arrested for any cognizable offence, every officer authorised to arrest a person shall,

inform such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.

(3) In the case of a non-cognizable and bailable offence, the Assistant Commissioner, or the Deputy

Commissioner, as the case may be, shall, for the purpose of releasing an arrested person on bail or otherwise,

have the same powers and be subject to the same provisions as an officer in charge of a police station has, and

is subject to, under section 436 of the Code of Criminal Procedure, 1973.

(4) All arrests under this section shall be carried out in accordance with the provisions of the Code of Criminal

Procedure, 1973 relating to arrests.";

SUMMARY

OFFENCES Imprisonment Cognizable/non-

cognizable

Arrest


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(i) Knowingly evade

payment of service Tax

(ii) Falsely claimed and

utilised CENVAT Credit

[without actual received

of Input/Capitalgoods/input Service]

(iii) False Books of

Accounts or False

supply/Fails to supply

information

First time Offence:

(a)Amount upto`50lakhs: Maximum 1 year

(b)Amount exceeding`50 lakhs:

Minimum 6 monthsMaximum 3 years

For the second and every

subsequent offences:

(c) upto`50 lakhs:Maximum 3 years

(d) In excess of`50lakhs: Maximum 3 years

All cases Non-

cognizable and

bailable

(a) No arrest

(b) Arrest order issued by

commissioner of CentralExcise. [bail given by the

AC/DC]

(c) No arrest

(d) same as point(b)

(iv) Collects but fails to

pay to Central

Government within 6

months form the due date

of payment

First time Offence:

(a) Amount upto`50lakhs: Maximum 1 year

(b) Amount exceeding`50 lakhs:

Minimum 6 months.

Maximum 7 years

For the second and every

subsequent offences:

(c)Amount upto`50lakhs: Maximum 3 years.

(d) Amount in excess of`50 lakhs: Maximum 7

years

(a) Non-

cognizable and

bailable

(b) Cognizable

(c) Non-

cognizable and

bailable

(d) Cognizable

(a) No arrest

(b) Arrest without arrest

warrant Forward to Magistrate

within 24 hrs]. Bail cannot be

given by the Excise

Department. Bail can be given

by Court.

(c)No arrest

(d)Same as point (b)

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5) SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013

The Finance Act, 2013 has introduced an amnesty scheme kwon as VCES (Voluntary Compliance

Encouragement Scheme) to encourage the service tax defaulter (who are either stop/non fillers or not-

registered or not disclosed true liability in return) to pay tax due without payment of interest and penalty.

The scheme has been summarized as under:-

(1) Eligible person: Any person who is liable to pay tax for the period from 1.10.2007 to


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31.12.2012, but has not paid the same till 01.03.2013 shall be eligible to get

benefit of this scheme.

(2) Not Eligible

person:

(a) to whom any notice or order u/s. 72,73 or 73A has been issued before

1.3.2013.

(b) Person who has filed service tax return disclosing his true liability but

fails to pay entire service tax on the basis of his return.

(c) where a notice or an order of determination has been issued of any period

on any issue previously.

(d) against whom the following inquiry/investigation/ audit has been pending

on 1.3.2013:

(i) an inquiry or investigation in respect of a service tax not/short levied or

not/short paid has been initiated by way of

(a) search of premises under section 82 of the Chapter; or

(b) issuance of summons under section 14 of the Central Excise Act, 1944, as

made applicable to the Chapter under section 83 thereof: or

(c) requiring production of accounts, documents or other evidence under the

Chapter or the rules made thereunder; or

(ii) an audit has been initiated,

(3) Benefit: Immunity from interest and penalty and other proceedings for the period

from 1.10.2007 to 31.12.2012.

(4) Matter is

Conclusive:

The Proceedings under VCES is final and cannot be re-opened by any forum.

(5) Condition to

avail the benefit

(i)Truthful declaration on or before 31.12.2013:

The defaulter is required to make a truthful declaration of all his pending tax

dues from 1.10.2007 to 31.12.2012 on or before 31.12.2013.

However,where the Commissioner of Central Excise has reasons to believe

that the declaration made by a declarant under this Scheme was substantiallyfalse, he may, within 1 year from the date of declaration, for reasons to be

recorded in writing, serve notice on the declarant in respect of such

declaration requiring him to show cause why he should not pay the tax dues

not paid or short-paid.

(ii) Pay tax due:

At least 50% of tax due: on or before 31.12.2013.

Balance tax due:

(i) on or before 30.06.2014; or


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(ii) on or before 31.12.2014 with interest @ 18% from 1.7.2014 on wards

The amount paid shall not be refundable under any circumstances.

Where the declarant fails to pay the tax dues, either fully or in part, as

declared by him, such dues along with interest thereon shall be recovered

under the provisions of section 87 of the Chapter.

(iii)For the month of on or after January 2013, the assessee shall required to

clear their dues as per normal provisions of the Act.

"tax dues" means the service tax due or payable under the Chapter or any other amount due or payable under

section 73A thereof, for the period beginning from the 1st day of October, 2007 and ending on the 31st day of

December, 2012 including a cess leviable thereon under any other Act for the time being in force, but not paid

as on the 1st day of March, 2013.

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(6) Issue of Show-cause Notice(i) Section 73(2A), newly inserted: where Show cause notice was issued by invoking extended period of

limitation but latter on the fraud etc. is not established, then it shall be deemed that the notice was issued for a

situation of no fraud [i.e, for 18 months] similar provision was already exist in section 11A of the Central

Excise.


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RELEVANT NOTIFICATIONS AND CIRCULARS ISSUED BETWEEN1.05.2013 to 31.10.2013

A. CENTRAL EXCISE

1. CENVAT CREDIT:

(i) Notification No. 12/2013, dated 27.9.2013: Rule 3(5A) has been substituted by a new rules to covered

levy of duty incase capital goods are removed as waste and scrap.

Rule 3(5A): W.E.F 27.9.2013:

(a) removed as good condition: If the capital goods, on which CENVAT credit has been taken, are

removed after being used, the manufacturer or service provider shall pay higher of (A) or (B):-

A. an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage

points calculated by straight line method as specified below for each quarter of a year or part thereof from

the date of taking the CENVAT Credit, namely:-

(i) for computers and computer peripherals:for each quarter in the first year @ 10%

for each quarter in the second year @ 8%for each quarter in the third year @ 5%for each quarter in the fourth and fifth year @ 1%

(ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter:

B. The amount to be paid shall be equal to the duty leviable on transaction value.(b) removed as waste and scrap: If the capital goods are cleared as waste and scrap, the manufacturer

shall pay an amount equal to the duty leviable on transaction value.-------------------------------------------------------------------------------------------------------------------------------------------

(ii)Circular No. 973/07/2013-CX, dated 4.9.2013: Rule 6(3) of the CENVAT Credit shall not be

applicable in relation to goods cleared under the exemption notification No. 29,30,31,32/2012.

Central Government has issued notifications no 29/2012-CE, 30/2012-CE, 31/2012-CE, 32/2012-CE and

33/2012-CE all dated 9th July, 2012 to exempt certain manufactured goods when cleared against the

specified duty credit scrip issued to an exporter.

Issue: Whether such clearances are being treated as clearances of exempted goods and therefore, rule 6(3)

of the Cenvat Credit Rules, 2004, shall be applicable.

Clarified that: One of the conditions for availing of these exemptions is that duties leviable, but for these

exemptions, shall be debited in or on the reverse of said scrip. The scrip holder is also permitted to avail

of cenvat credit of the duties debited in the scrip.

In view of these provisions it has been decided that such debit of duty in these scrips shall be treated as

payment of duty for the purpose of determining the applicability of rule 6 of the Cenvat Credit Rules,

2004. Therefore, it is clarified that rule 6(3) of the Cenvat Credit Rules, 2004 is not applicable.

[Specified duty credit scrip: (i) Focus Product Scheme (FPS); (ii) Focus Market Scrip (FMS); (iii) Status

Holder Incentive Scheme; (iv) Agri Infrastructure Incentive Scheme; (v) VKGUY (Special Agricultural

& Village Industry Scheme)]


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2. REGISTRATION

(i) Exemption from central Excise registration: Notification No. 11 /2013, dated 2.8.2013

Unregistered premises used solely for affixing a sticker or re-printing or re-labeling or re-packing of

pharmaceutical products (falling under Chapter 30 of the First Schedule to CETA) with lower ceilingprice to comply with the notifications issued by the National Pharmaceutical Pricing Authority under

Drugs (Prices Control) Order, 2013, subject to satisfaction of prescribed condition. [Notification No.

11/2013, dated 2.8.2013]

Note: Notification No. 22/2013 The Central Govt. exempts the scheduled formulations as defined

under the Drugs Price Control Order (DPCO), 2013, falling under Chapter 30 of the First Schedule to the

Central Excise Tariff Act, 1985 and which are subjected to re-printing, re-labeling, re-packing or

stickering, in a premises which is not registered under the Central Excise Act, 1944 or the rules made

thereunder, in pursuance of the provisions contained in the said Drugs Price Control Order (DPCO),

2013, from whole of the duty of excise leviable thereon.

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3. WAREHOUSING

Rule 20(1) provides that, the Central Government may by notification, extend the facility of removal of

any excisable goods from the factory of production to a warehouse, or from one warehouse to another

warehouse without payment of duty.

(i) Notification No. 07/2013. Dated 23.5.2013: In exercise of powers conferred by rule 20(1) of the

Central Excise Rules, 2002, the Central Government hereby extends the facility of

removal of all excisable goods (falling under the First Schedule to the Central Excise Tariff Act, 1985)

- from the factory of production, intended for storage in a godown or retail outlet of a Duty FreeShop in the Departure Hall/ the Arrival Hall of International Airport (appointed or licensed as

warehouse under Section 57/ 58 of the Customs Act, 1962, and

- for sale therefrom, against foreign exchange to passengers going out of India or to the passengers/members of crew arriving from abroad,

subject to limitations, conditions and safeguards as may be specified by the Central Board of Excise and

Customs in terms of sub-rule (2) of rule 20 of Central Excise Rules, 2002. [For this Circular

No.970/04/2013, dated 23.5.2013 has been issued by the CBEC]

(ii)Notification No. 09/2013, dated 23.5.2013: where a godown or retail outlet of a Duty Free Shop is

appointed or licensed under the provisions of sections 57/ 58 of the Customs Act, 1962, such godown or

retail outlet shall be deemed to be registered as warehouse under rule 9 of the Central Excise Rules, 2002.

Note: Earlier only foreign goods were sold in Duty Free shop at International airport and passengers

leaving or coming to India were buying these goods without paying customs duty. Now, indigenous

goods can be sold without paying excise duty there.

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4. Circular No. 974/08/2013-CX, dated 17th

September 2013: Guidelines for arrest and bail under

Central Excise

Non-bailable offences:


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1. A person is liable to be arrested should be informed of the grounds of arrest and produced before a

magistrate without unnecessary delay and within 24 hours of arrest.2. In relation to the following offences, decision to arrest may be taken by the commissioner

(a) clandestine removal of manufactured goods;(b) removal of goods without declaring the correct assessable value and receiving a portion of sale

price in cash which is in excess of invoice price and not accounted for in the books of account;

(c) taking Cenvat Credit without the receiving the goods specified in the invoice;(d) taking Cenvat Credit on fake invoices;(e) issuing Cenvatable invoices without delivering the goods specified in the said invoice.However, for all other offences (refer page 141), decision to arrest shall be taken by the Commissioner

only with the approval of the jurisdictional Chief Commissioner.

Bailable offence: Any person arrested for non-cognizable offence shall have to be released on bail, if he

offers bail, and in case of default of bail, he is to be forwarded to the custody of magistrate within 24

hours of arrest. An officer not below the rank of Superintendent of Central Excise can exercise powers togrant bail.Precautions to be taken by the departmental officers: Powers to arrest a person needs to be exercised

with utmost caution. Chief Commissioners/ Commissioners of Central Excise are required to ensure that

approval for arrest for non-bailable offence is granted only where the intent to evade duty is evident and

element of mens rea / guilty mind is palpable. Attention is also invited to the decision of the Honble

Supreme Court in case of D. K. Basu Vs State of West Bengal, wherein specific guidelines in respect of

arrest have been provided. These are required to be followed.Decision to arrest needs to be taken on case-to-case basis considering various factors, such as, nature &

gravity of offence, quantum of duty evaded or credit wrongfully availed, nature & quality of evidence,possibility of evidences being tampered with or witnesses being influenced, cooperation with the

investigation, etc. To summarize, power to arrest has to be exercised after careful consideration of the

facts of the case and the above factors.

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B. CUSTOMS

Duty Drawback:

(1) Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 has been amended and

Corresponding amendments has been made in rule 6(4) and rule 7(5)-

Name of the product Before 21.9.2013 On or after 21.9.2013

[Notification No. 97/2013]

Rice falling under heading 1006 Drawback not allowed. Drawback not allowed.

Wheat falling under heading

1001

Drawback allowed. Drawback not allowed.

Milk products falling under

heading 0401 to 0406.

Drawback not allowed. Drawback allowed

Casein, caseinates and other

casein derivates; casein glues

falling under heading 3501

Drawback not allowed. Drawback allowed

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Baggage

(2) Items of Annexure 1 for which general free allowances not allowed now includes- (e) Flat Panel

(LCD/LED/Plasma) Television (w.e.f 26.8.2013)[Notification No. 84/2013]


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-------------------------------------------------------------------------------------------------------------------------------------------

Warehouse

Section 61: Interest charged after expiry of 90 days (3) It has been clarified that the period of 90 days shall be calculated from the date of deposit of goods in

the warehouse. [Circular No. 39/2013, dated 1.10.2013]

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Classification

(4)

Name of the product

imported

Classified in the tariff heading

(1) Tablet computers Should be classified under the heading 8471 (Automatic data processing

machines, etc. no elsewhere specified or included) and not under the heading

8517 (Telephone sets..etc.)Circular 20/2013, dated 14.5.2013

(2) Bluetooth Wireless

Headsets for cell phones/

mobile phones

Must be classified under the heading 8517 (Telephone sets etc..or other

devise for the transmission of voice/data through wire or wireless

communication) and not under the heading 8518 (headphones and earphones,

whether or not combined with microphone)- Circular 36/2013, dated

5.9.2013

(3) Cockroach traps and

Mosquito repellent

Correctly classifiable under the heading 3808 and not under the head 3506 or

3822 or 3926 or 4823.

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(5) Circular No. 38/2013-Customs, dated 17thSeptember 2013: Guidelines for arrest under Customs

The decision to arrest should be taken in cases which fulfil the requirement of the provisions of Section

104 (1) of Customs Act, 1962 and after considering the nature of offence, the role of the person involved

and evidence available

.While the Act does not specify any value limits for exercising the powers of arrest, it is clarified that

arrest in respect of an offence, categorized as bailable offence, should be effected only in exceptional

situations which may include:

(a) Outright smuggling of high value goods such as precious metal, restricted items or prohibited items

or goods notified under section 123 of the Customs Act, 1962 or foreign currency where the value of

offending goods exceeds`20 lakh.

(b) In a case related to importation of trade goods (i.e. appraising cases) involving wilful mis-

declaration in description of goods/concealment of goods/goods covered under section 123 of Customs

Act, 1962 with a view to import restricted or prohibited items and where the CIF value of the offending

goods exceeds`50 lakh.

Further, in every case of arrest effected in accordance with the provisions of section 104 (1) of the

Customs Act, 1962, there should be immediate intimation to the jurisdictional Chief Commissioner or

DGRI, as the case may be.

A person arrested for a non-bailable offence should be produced before concerned Magistrate without

unnecessary delay in terms of provisions of Section 104 (2) of the Act. further, if a person is arrested for

bailable offence then the custom officer is bound to offer release on bail and accept bail bond.

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C. SERVICE TAX

(1) Restaurant Services:

(i) Mega Exemptions: Food served by Air conditioned canteen running within a factory under the

provisions of the Factories Act,1948, shall be exempted from service tax w.e.f 22.10.2013.

(ii) Adhoc- exemption [Exemption order 1/2013,dated 17.09.2013]: restaurant service provided from17.9.2013 to 31.3.2014 in Uttarakhand shall be exempted.

Taxable Services provided between 17.9.2013 to 31.3.2014 in relation to serving of food or beverages by

a restaurant/eating joint/ mess to any person in the State of Uttarakhand shall be exempted.

(iii) Circular No. 173/8/2013, dated 7.10.2013:

Doubts Clarifications

1. In a complex where air conditioned as

well as non-air conditioned restaurants are

operational but food is sourced from the

common kitchen, will service tax arise in

the non-air conditioned restaurant?

In a complex, if there is more than one restaurant,

which are clearly demarcated and separately named

but food is sourced from a common kitchen, only the

service provided in the specified restaurant is liable

to service tax and service provided in a non air-

conditioned or non centrally air- heated restaurant

will not be liable to service tax. In such cases,

service provided in the non air-conditioned / non-

centrally air-heated restaurant will be treated as

exempted service and credit entitlement will be as

per the Cenvat Credit Rules.

2. In a hotel, if services are provided by a

specified restaurant in other areas e.g.

swimming pool or an open area attached

to the restaurant, will service tax arise?

Yes. Services provided by specified restaurant in

other areas of the hotel are liable to service tax.

3. Whether service tax is leviable on goods

sold on MRP basis across the counter as

part of the Bill/invoice.

If goods are sold on MRP basis (fixed under the

Legal Metrology Act) they have to be excluded from

total amount for the determination of value of service

portion.

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(2) Hotel Services:(i) Adhoc- exemption [Exemption order 1/2013,dated 17.09.2013]: renting of room in a hotel, club etc.

from 17.9.2013 to 31.3.2014 in Uttarakhand shall be exempted.

Taxable Services provided between 17.9.2013 to 31.3.2014 in relation to Services by way of renting of a

room in a hotel, inn, guest house, club, campsite or other commercial place meant for residential or

lodging purposes; to any person in the State of Uttarakhand shall be exempted. [Order No. 1/1/2013]

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(3) Construction service:(i) Abatement increased to 75 % instead of 70% if two condition cumulatively satisfied w.e.f 8.5.2013:

(a) for a residential unit satisfying both the following

conditions,:

(i) the carpet area of the unit is less than 2000 square

feet; or and

(ii) the amount charged for the unit is less than ` 1crore;

75%

b) other case 70%

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(4) Education Service:

(i) Mega Exemption: w.e.f 10.9.2013, services provided by NSDC exempted.

Any services provided by, _

(i) the National Skill Development Corporation set up by the Government of India;

(ii) a Sector Skill Council approved by the National Skill Development Corporation;

(iii) an assessment agency approved by the Sector Skill Council or the National Skill Development

Corporation;

(iv) a training partner approved by the National Skill Development Corporation or the Sector Skill

Council

in relation to (a) the National Skill Development Programme implemented by the National Skill

Development Corporation; or (b) a vocational skill development course under the National SkillCertification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill

Development Corporation. [w.e.f 10.9.2013]

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(5) SEZ Unit/Developer:(i) Manner service tax exemption to SEZ unit/Developer is revised notification no. 12/2013, dated

1.7.2013:

1. Services received by a unit located in a Special Economic Zone (SEZ) or Developer of SEZ and used

for the authorised operations shall be exempted from the whole of the service tax, education cess andsecondary and higher education cess leviable thereon.

Particulars Manner of Exemption

(1) Specified Servicesconsumed wholly within theSEZ

(a)Do not pay tax at all. [Upfront exemption/ab initio exemption](a) Pay tax and opt for refund route as prescribed in Rule 7 of the

CENVAT Credit;

(2) Specified services NOTConsumed Wholly Within SEZ.

Pay tax full and claim proportionate refund as prescribed in Rule 7 of theCENVAT Credit Rules.

Notes:

(1) For the purpose of distribution, the turnover of the SEZ Unit or the Developer shall be taken as the

turnover of authorised operation during the relevant period.

(2) No CENVAT credit of service tax paid on the specified services used for the authorised operations in

a SEZ has been taken under the CENVAT Credit Rules, 2004;

(3) The claim for refund shall be filed within one year from the end of the month in which actual payment

of service tax was made. Delay can be condone by the Assistant/Deputy Commissioner of Central Excise.

(4) Proper accounts of receipts and used of service for authorized operation has to be maintained.

(5) No refund shall be available on services consumed for operations in DTA.


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(6) if there are more than one SEZ Unit registered under a common service tax registration, a common

refund may be filed at the option of the assessee.

(7) Where any sum of service tax paid on specified services is erroneously refunded for any reason

whatsoever, such service tax refunded shall be recoverable under the provisions of the said Act and the

rules made there under, as if it is recovery of service tax erroneously refunded;

(8) the SEZ Unit or the Developer shall furnish to the jurisdictional Superintendent of Central Excise a

quarterly statement, in Form A-3, furnishing the details of specified services received by it without

payment of service tax, by 30th of the month following the particular quarter:

Provided that for the quarter of July, 2013 to September, 2013, the said statement shall be furnished by

the 15th of December, 2013.

Important changes between earlier exemption Notification No. 40/2012 and new exemption

Notification No. 12/2013:

(1) As per Notification No. 40.2012, in order to get ab initioexemption, the specified services must whollyconsumed and provided within SEZ. However, Notification No, 12/2013, provides that specified services

received by the SEZ unit/ the developer must be exclusively used for authorized operation. Therefore, it is

not necessary that service must be provided within SEZ , it must be consumed by the authorized operation

of SEZ unit/developer.

(2) Manner of Refund of in case of services received is shared between DTA unit by the SEZ unit:

Service Tax shall be charged and refund must be claimed in the following manner -

Notification No. 40/2012:-Maximum refund = Service tax x (Export turnover/ Total Turnover)

Notification No. 12/2013: proportionate refund in the manner prescribed in Rule 7 of the CENVAT

Credit Rules, 2004.

(3) Option not to opt the exemption and claim CENVAT Credit:

Notification 40/2012: not expressly provided.

Notification 12/103: expressly provided.

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(6) Circular No. 171/6/2013-ST, dated 17.9.2013: Guidelines for post arrest procedures and Bail in

relation to offences punishable under the Finance Act, 1994

1. Post arrest procedure in case of non-cognizable and bailable offences:(i) the Assistant Commissioner or Deputy Commissioner is bound to release a person on bail against a

bail bond. The bail conditions should be informed in writing to the arrested person and also informed on

telephone to the nominated person of the person (s) arrested .The arrested person should be also allowed

to talk to a nominated person. The conditions will relate to, inter alia, execution of a personal bail bond

and one surety of like amount given by a local person of repute, appearance before the investigating

officer when required and not leaving the country without informing the officer. The amount to be

indicated in the personal bail bond and security will depend, inter alia, on the amount of tax involved.

(ii) If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer

concerned on bail forthwith. However, only in cases where the conditions for granting bail are not

fulfilled, the arrested person shall be produced before the appropriate Magistrate without unnecessarydelay and within twenty-four (24) hours of arrest. The arrested person may be handed over to the nearest

police station for his safe custody, within 24 hours, during the night under a challan, before he is

produced before the Court.


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2. Post arrest procedure in case of cognizable offences:only in the event of circumstances preventing the production of the arrested person before a Magistrate

without unnecessary delay, the arrested person may be handed over to nearest Police Station for his safe

custody, within 24 hours, under a proper challan, and produced before the Magistrate on the next day, and

the nominated person of the arrested person may be also informed accordingly.

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Note: Firm of advocates are also covered under Reverse charge along with Individual advocates.

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REVISIONARY TEST PAPERS

[ SERVICE TAX]

Question 1: S Pvt. Ltd. provided or agreed to be provided the following services for the months of

December 2013.

i) Services rendered to poor people free of cost (value of the services computed on comparative basis `

40,000)

ii) Testing of samples from plant for pest detection`1,00,000

iii) Advanced received in December, 2012 from clients for which no service has been rendered so far `

50,000

iv) Leasing of vacant land to a stud farm`50,000

v) Renting of agro machinery for agricultural purpose`5,00,000

Compute the service tax payable by it in the month of December, 2013. The aforesaid amounts are

exclusive of service tax. Further, the assessee is not eligible to get Small Service Provider exemption.

Question 2: Compute Service tax payable for the Quarter ending 31.3.2014 from the following services

provided by Mr. X .

i) Amount received for the services rendered in October , 2013 (Bills for the same were issued on October

29, 2013)`1,00,000

ii) services rendered in relation to Supply of farm labour`1,00,000

iii) commission received in relation to sale of rice`2,00,000

iv) Amount received for warehousing of biscuits`50,000

v) Amount received on account of Training of farmers on use of new fertilizers`50,000

vi) Leasing of vacant land to a poultry farm`1,00,000

vii) Testing of soil of a farm land` 50,000.

The aforesaid amounts are exclusive of service tax. Further, the assessee is not eligible to get Small

Service Provider exemption.

Question 3: A manufacturer of West Bengal provides the following information to compute service tax

liability. Both for the month of April 2013 and for July 2013.(a) Manufacture of wine liable to excise duty under the West Bengal Excise Act. value of`10,00,000.

(b) Manufacture of Ayurvedic Medicine liable to excise duty under the Medicinal and Toilet Preparations

(Excise Duty) Act, 1955, value of`20,00,000.


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(c) Manufacture of herbal cream liable for excise duty as per the provisions for Central Excise Duty but

fails to pay excise duty, value of`30,00,000.

(d) Processing of semi-finished goods which is not liable for excise duty, value of`10,00,000.

The assessee is not a SMALL SERVICE PROVIDER for the F.Y 2013-14.

Question 4: Discuss the taxability of the following vocational training courses provided by variousinstitutes:

(a)Courses run by ITI w.r.t approved trades notified under the Apprentices Act, 1961, affiliated toNational Council for Vocational Training

(b)Courses run by ITC w.r.t approved trades notified under the Apprentices Act, 1961, affiliated toState Council for Vocational Training

(c)Modular Employable Skill Course, approved by the National Council for Vocational Training, runby a person registered with the Directorate General of Employment and Training.

(d)Courses run by institute affiliated to the National Skill Development Corporation.Question 5: Discuss consequences in relation to prosecution in case of following offences:

Particulars(1) Intentionally evades payment of service tax of `60 lakhs(2) Avails CENVAT Credit on input service before receipt of Invoice but not yet utilsed the

Credit.

(3) Fails to supply information as required by the Excise officer involving service tax amount of`

50 lakhs.

(4) Service Tax received from the client of`60 lakhs but not deposited in Government A/c.

(5) Service Tax received from the client of`60 lakhs and deposited`59 lakhs in Government

A/c.

Question 6: Education Cess is charged by virtue Finance Act (No.2), 2004 and Secondary HigherEducation Cess is charged by virtue of the Finance Act, 2007, in the both these Act, it has been

mentioned that EC and SHEC shall be charged on service Tax levied u/s. 66 of the Finance Act, 1994. An

assessee argues that w.e.f 1/7/2012, service tax is charged u/s 66B and therefore he is not required to pay

EC and SHEC on Service Tax from 1.7.2012 . Comment

Question 7: A Show Cause Notice u/s 73 has been issued to an assessee by invoking extended period of

limitation (i.e, 5 years) on ground of fraud, suppression, willful misstatement of facts etc. However, on

appeal, the Tribunal held that there no fraud is involved and therefore the application of extended period

of limitation is invalid. Now, the Excise Officer move to determine the service tax liability by applying

normal period of limitation of 18 months but the assessee is of the view that since the extended period of

limitation has not been sustained, therefore the entire proceeding has to be quashed. Comment.

Question 8: Central Excise Officer has issued a Show Cause Notice u/s. 73(1) regarding non/short levied

or non/short payment of service tax within the period of 18 months but fails to give details of service tax

not levied/paid or short levied/paid. After few days but within 18 months, the Excise officer send a

statement containing detail of service tax demand against the assessee. The assessee, is of the view that

since such statement does not amount to Notice, therefore legally he is not liable to pay the service tax

demand raised by the Central Excise officer. Comment

Question 9: A company fails to deposit service tax collected from its client. The Central Excise Officer

serve a notice for penalty against the company and against the director of the company. The Director ofthe company taken the stand that since the company has paid the penalty, therefore he is not liable to pay

further penalty for the same default. What is your view ?

Question 10: Discuss the taxability of following food supply service:


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i) Food supply service by a AC canteen maintained by a factory covered in the Factory Act, 1948.

ii) Food supply services provided by an AC restaurant without having license to serve alcoholic

beverages in the State of West Bengal.

iii) Food supply services provided by an AC restaurant without having license to serve alcoholic

beverages in the State of Utarakhand.

iv) Packed Food sold at the counter under MRP as per the Legal Metrology Act.

Question 11: Computer the taxable value of service from the following construction services provided

during the month of October 2013-

i) Construction of office building 1900 sq. ft. and entire amount received before issuance of completion

certificate` 80 lakhs.

ii) Construction of residential unit 1900 sq. ft. and entire amount received after issuance of completion of


iii) Construction of residential unit 1900 sq. ft. and part of the amount received before issuance of

completion certificate` 1 crores.

iv) Construction of residential unit 2000 sq. ft and entire amount received before issuance of completion


v) Construction of residential unit 1980 sq. ft and entire amount received before issuance of completion


vi) Construction of multi floor parking for Kolkata Municipal Corporation. Entire amount received before

issuance of completion certificate` 5 crores.

Note: Amount collected includes value of land and CENVAT credit has not been availed.

Question 12: Answer the following in relation to the provisions of Service Tax:

(a)Prescribed fees for filling appeal to CESTAT.(b)Can appeal relating to chargeability of service tax be filed in High Court ?(c)What are the matter for which advance ruling can be sought ? Can advance ruling be sought only

for question of law?

(d)Matter relating to service tax cannot go the Settlement Commissioner. Comment(e)The Central Government has the power to grant exemption from service tax in general but not inrelation to any specific service. Comment.

Question 13: The Commissioner of Service Tax has reason to believe that an assessee understated his

taxable value of service and accordingly directed for special audit but the assessee is of the view that his

accounts has already been audited u/s. 44AB of the Income Tax Act, therefore he is not liable for any

other audit. Comment.

Question 14: An assessee has paid service tax wrongly on services which are covered in the mega

exemption and when it comes to his knowledge he files a refund application after the prescribed time

limit under section 83 of the Finance Act, 1994 read with section 11B of the Central Excise Act, 1944.The Central Excise Officer denied the refund claim on the ground that the application is barred by

limitation. Comment


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Question 15: An assessee paid service tax and interest for delayed payment of service tax before the issue

of Show Cause Notice . The Department serve a SCN u/s. 73 and also started penalty proceedings u/s. 76

of the Act. Discuss, whether the action taken by the Department is correct in the eyes of the law ?

Question 16: (a) An Assessee has fails to pay service of`5,000 from 5.1.2013 to 15. 1. 2014. Computepenalty payable u/s. 76.

(b) Mr. X paid its service tax of ` 50,000 for the quarter end 31.3.2014 on 15.4.2014. Compute theamount of interest payable u/s. 75. In the Financial Year 2012-13, his taxable turnover was`20 lakhs.

Question 17: The Joint Commissioner of Central Excise has issued warrant to search the residence of the

assessee, where he has reason to believe that relevant documents has been secreted by the assessee. The

assessee is of the view that search can only be conducted in the registered premises and there is no power

to search the residence of the assessee under Service Tax. Comment.

Question 18: From following amounts received during the half year ended 31-3-2014. Compute Service

tax payable. The assessee became liable to pay service tax for the first time w.e.f 1.7.2013

i) Services performed before such service became taxable`10,00,000, where invoice and payment also

has been received before 1.7.2013.

ii) Services by way of renting of residential dwelling for use as residence`5,00,000

iii) Advance received in March 2014 for service to be rendered in July, 2014`8,00,000 (The agreement

got terminated in April,2014. Hence, no services were rendered in July. However, a sum of`5,50,000

was refunded in June, 2014)

iv) For free services rendered to customers, amount reimbursed by the manufacturer of such product`

1,00,000 (for the period after the imposition of service tax)

v) Other Amounts realized and on which service tax is payable`6,00,000

Note: All the above figures are exclusive of service tax.

Question 19: Examine the following:

(a) Mr. X provides for the first time a taxable service under the unregistered brand name of another

person. During the financial year his taxable value is`5 lakh. Examine, whether he is eligible for SmallService Provider Exemption under Notification No. 33/2012.

Question 20: Mr. X, an author of an Income Tax book (relevant for professional exams), transfers thecopyright of his Books to Tax Point (a reputed publishers) for a consideration of`100 per book sold on1.12.2013. From the following information determine the point of taxation -

No of Books Sold5,000

Date of Issue of Invoice by Mr. X 5.12.2013

Date of amount received by Mr. X 1.1.2014

Question 21: Suppose in Question 20, the consideration is fixed for`10,00,000 per annum irrespectiveof no of books sold. What is the point of taxation ?

Question 22: X Ltd. owner of a coal mines in Odisha and also has obtained patent for the said mines from

the Government. X Ltd. transfers the right for commercial extraction of coal to Y Ltd. at agreed royalty of`1000 for each tones of coal extracted. The details of coal extracted as are underMonth Coal extracted (in tones) Date of invoice issued Date of receipt of payment


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1st Jan 2014 1500 10th January 2014 ` 15 lakh on 02nd February2014

1thFeb 2014 2000 15thMarch 2014 `20 lakh on 10thMarch 2014

1stMarch 2014 1000 25thMarch 2014 `10 lakh on 30thMarch 2014

Determine the Point of Taxation.-------------------------------------------------------------------------------------------------------------------------------------------

SOLUTION TO RTP

Solution to Question 1: Computation of service tax payable for the months of December, 2013

`______i) Services rendered to poor people free of cost NIL

[Since there is no Consideration, therefore no service tax shall be levied]

ii) Testing of samples from plant for pest detection NIL

[by virtue of amendments made by the Finance Act, 2013, now

all type of testing in relation to agriculture are covered under negative list]

iii) Advances received in December, 2013 from clientstaxable on receipt

basis as per Rule 3 of Point of Taxation Rules] 50,000

iv) Leasing of vacant land to a stud farm 50,000

[Not covered under Negative List, since it is related to rearing of horses]

v) Renting agro machinery for agricultural purposes NIL

[Covered under Negative List]

Taxable Value 1,00,000

Service Tax @ 12.36% 12,360

Solution to Question 2: `_______

i) Amount received for the services rendered in October, 2013 NIL

[As per Rule 3 of Point of taxation, the point of taxation should be 29th Oct 2013.

Hence, receipts of`1,00,000 is not chargeable to service tax in March, 2013]

ii) services rendered in relation to Supply of farm labour NIL[covered under Negative List]

viii) commission received in relation to sale of rice [covered under Negative List] NIL

iii) Amount received for warehousing of biscuits 50,000

[not covered under Negative List]

iv) Amount received on account of Training of farmers on use of new fertilizers NIL

[Covered under Negative list]

v) Leasing of vacant land to a poultry farm NIL

[Covered under Negative list]

vi) Testing of soil of a farm land [covered under Negative list] NIL____

Taxable value of service 50,000


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Service Tax @ 12% 6,000

Education Cess @ 2% 120

Secondary and higher education Cess @ 1% 60

Service Tax Payable 6,180

Solution to Question 3:Particulars April 2013 July 2013

(a) Manufacture of wine liable to excise duty under the West

Bengal Excise Act: not taxable covered in Negative list

NIL NIL

(b) Manufacture of Ayurvedic Medicine liable to excise duty

under the Medicinal and Toilet Preparations (Excise Duty) Act,

1955. W.e.f 10.5.2013 not taxable, since covered in Negative List

by the Finance Act, 2013.

20,00,000 Nil

(c) Manufacture of herbal cream liable for excise duty as per the

provisions for Central Excise Duty but fails to pay excise duty.

Covered in the Negative List actual payment of excise duty is not

relevant but it should be liable for excise duty.

NIL Nil

(d) Processing of semi-finished goods which is not liable for

excise duty. Taxable, since the process not liable for excise duty

10,00,000 10,00,000

Taxable Value 30,00,000 10,00,000

Service Tax @ 12.36% (including EC&SHEC @3%) 370800 123600

Solution to Question 4:

(a) Courses run by ITI w.r.t approved tradesnotified under the Apprentices Act, 1961,

affiliated to National Council for Vocational

Training.

Not taxable. Covered in the Negative List

(b) Courses run by ITC w.r.t approved trades

notified under the Apprentices Act, 1961,

affiliated to State Council for Vocational

Training.

Before 10.5.2013: Taxable

On or after 10.5.2013: Not taxable. Covered in

the Negative List by virtue of Amendments

made by the Finance Act, 2013.

(c) Modular Employable Skill Course, approved

by the National Council for Vocational Training,

run by a person registered with the Directorate

General of Employment and Training.

Not taxable. Covered in the Negative List.

(d) Courses run by institute affiliated to the

National Skill Development Corporation.

Before 10.5.2013: Not taxable, covered in

Negative list

From 10.05.2013 to 09.09.2013: Taxable.

On or after 10.09.2013: Not taxable, covered in

the Mega exemption Notification No. 25/2012,

vide entry No. 9A.Answer to Question 5:

Particulars No of time Imprisonment before Imprisonment on or after


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of offences 10.5.2013[Section 83 of the Finance

Act, 1994 read with section

9A of the Central Excise Act]

10.5.2013

[Section 89 of the Finance

Act, 1994]

(1) Intentionally

evade payment of

service tax of ` 60lakhs

First time Minimum6months (Note 1)

Maximum- 3 years

Non-cognizable and bailable.

Minimum6months (Note 1).

Maximum- 3 years


Subsequent Same as above Maximum- 3 years.


(2) Avail CENVAT

Credit on input

service before

received of Invoice

but not yet utilsed

the Credit.

First Time/

Subsequent

ly

No imprisonment No imprisonment

(3) Fails to supply

information as

required by the

Excise officer

involving service tax

amount of`50

lakhs.

First time Maximum 1 year


No arrest

Maximum 1 year.


No arrest.

Subsequent Minimum6months (Note 1)

Maximum- 3 years

Non-cognizable and bailable.No arrest.

Maximum- 3 years.

Non-cognizable and bailable.No arrest.

(4) Service Tax

received from the

client of ` 60 lakhs

but not deposited in

Government A/c.

First Minimum6months (Note 1)

Maximum- 3 years

Non-cognizable offences and

bailable.

Minimum6months (Note 1)

Maximum- 7years

Cognizable offences and non-

bailable [Bail can be given by

the court]

Subsequent Same as above Maximum7 years.

Cognizable and non-bailable.

[Bail can be given by thecourt]

(4) Service Tax

received from the

client of ` 60 lakhs

and deposited ` 59

lakhs in Government

A/c.

First Maximum 1 year


No arrest

Maximum 1 year.


NO arrest.

Subsequent Minimum6months (Note 1)

Maximum- 3 years

Non-cognizable and bailable.No arrest

Maximum- 3 years.

Non-cognizable and bailable.No arrest


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Note 1: In the absence of special and adequate reasons to the contrary to be recorded in the judgment of

the court, such imprisonment shall not be for a term of less than 6 months.

Answer to Question 6: Section 66BA has been newly inserted by the Finance Act, 2013 with

retrospective effective from 1.7.2012, which provides that reference to section 66 (old charging section)

of the Finance Act, 1994, in the said Finance Act or in any other Act, will be construed as reference to

section 66B (new charging Section).

Therefore, in view of the above provisions EC and SHEC shall continue to be charged in the new

charging section also. Hence, the contention of the assessee is not correct.

Answer to Question 7: In section 73, a new subsection (2A) has been inserted by the Finance Act, 2013

which provides that where the department has raised a demand invoking the extended period of limitation

and subsequently, the extended period of limitation has been quashed by the appellate authority or

Tribunal or Court because of non-establishment of fraud etc. then, the Central Excise officer can proceed

to determine the service tax liability for the normal period of limitation.

Thus, in view of the above provision, the view expressed by the assessee cannot be accepted.

Answer to Question 8: Section 73(1A) provides that, the Central Excise Officer may serve within 18

months, subsequent to any notice or notices served earlier, a statement, containing the details of service

tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on

the person chargeable to service tax, and service of such statement shall be deemed to be service of notice

on such person, subject to the condition that the grounds relied upon for the subsequent period are same

as are mentioned in the earlier notices.

From the above provision, it is concluded that, section 73(1A) gives such statement the status of deemed

notice, assuming ground relying on the statement is same as that of earlier notice.

Therefore, the action of the Excise officer is legally valid and the assessee shall required to pay the

service tax demand.

Answer to Question 9: The stand taken by the director of the company is not valid in the eyes of the law.

By virtue of newly inserted section 78A as given below, the defaulting director shall also be liable to pay

penalty upto`1 lakh even though the company has already paid penalty.Section 78A provides that, where a company has committed any of the following contraventions,

namely:-

(a) evasion of service tax; or

(b) issuance of invoice in violation of the rules made under the provisions of this Chapter; or(c) availment and utilisation of CENVAT wrongly or

(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a

period of six months from the date on which such payment becomes due,

then any director, manager, secretary or other officer of such company, who at the time of such

contravention was in charge of, and was responsible to, the company for the conduct of business of su

amendments

Documents

relevant amendments

finance act

relevant case laws

similar amendments

tax laws

act exceed30 lakhs

relevant extracts

notifications circularsissued