Applicability of Service Tax

Applicability of Service Tax on photography Service - Whether cost of goods / material used is deductible from the value.?

There is very long history to determine the real nature of photography service. Photography service is neither sale nor works contract as held by the honorable Supreme Court in its earlier judgments.
Now, the issues are arising in Service Tax and different Courts / Tribunal has taken different stands in different situations.
A brief reference of these cases with departmental clarifications is as follows:

Clarification / Letter No. F.No.B.11/1/2001-TRU, Dated 9th July, 2001
In this letter, department clarified that,
The value of taxable service is the gross amount charged from the customer for the service rendered. However, the cost of unexposed photography films sold to the customer is excluded. The service provider claiming benefit of the cost of film should be advised to show them clearly on the invoices along with description and particulars of the film. Otherwise, the claim will not be considered as admissible. No other cost (such as photographic paper, chemicals, etc.) is excluded from the taxable value.

Decision of Apex Court in the matter of C K Jidhees versus Union of India reported in 2006 Supreme Court
In this case, Apex Court held that cost of material used in providing photograph service is not deductible.

Clarification / Letter M.F. (D.R.) Letter F. No. 233/2/2003-CX. 4, dated 3-3 -2006
On the issue of deduction of cost of goods / material from the value of photography service in view of notification no. 12/2003, board clarified that,
The matter has been examined by the Board. The intention of the Notification No. 12/2003-S.T., dated 20-6-2003 is to provide exemption only to the value of goods and material sold subject to documentary evidence of such sale being available. Therefore, in case, the goods are consumed during the provision of service and are not available for sale, the provision of the said notification would not be applicable. Therefore, in supercession of clarification to contrary, it is clarified that goods consumed during the provision of service, that are not available for sale, by the service provider would not be entitled to benefit under Notification No. 12/2003-S.T., dated 20-6-2003.

Tribunal decision dated 6-6-2006 in the matter of LAXMI COLOR (P) LTD. versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II reported in 2006 CESTAT, NEW DELHI
CESTAT held that there is no element of sale of goods in photography service. In this case, CESTAT has following the judgment of Apex Court in the matter of C. K. Jedees (Supra)

Tribunal decision dated 30-10-2006 in the matter of SHILPA COLOR LAB Versus COMMISSIONER OF C. EX., CALICUT reported in 2007 CESTAT,BANGALORE
In this case, CESTAT overruled the circular dated 3-3-2006 (supra) and judgment of Apex Court in the matter of C. K. Jedees (Supra). But, it has followed the judgment of Larger Bench of honorable Supreme Court in the matter of Bharat Sanchar Nigam Ltd. and Anr. v. UOI & Others - reported in 2006 . Accordingly, tribunal has allowed the deduction of value of goods / material used for providing photography service.
While delivering the judgment, CESTAT discussed and relied upon certain other decisions of honorable Supreme Court.

Tribunal decision dated 17-9-2007 in the matter of COMMISSIONER OF C. EX., MYSORE Versus EXPRESS COLOR LAB. Reported in 2008 CESTAT, BANGALORE
In this case, CESTAT followed the decision of Shilpa Color Lab (Supra) and allowed the deduction of value of goods / material sold while providing the photograph services.

High Court of Rajasthan delivered its order dated 20-7-2007 in the matter of WESTERN RAJASTHAN COLOUR LAB ASSOCIATION Versus UNION OF INDIA reported in 2008 HIGH COURT RAJASTHAN
In this matter, honorable HC followed the decision of honorable Supreme Court in the matter of C. K. Jedees (Supra) and denied the deduction of value of goods / material from the gross value.

Tribunal decision dated 28-11-2008 in the matter of JYOTI ART STUDIO Versus COMMISSIONER OF CENTRAL EXCISE, HYDERABAD reported in 2008 CESTAT, BANGALORE
In this matter, CESTAT allowed the deduction of value of goods / material from the gross value.
Moreover, CESTAT held that, deduction is available even if the details of inputs used need not be mentioned in the invoices/bills issued by them, as there is no specific clause in the Notification no. 12/2003.

Tribunal decision dated 13-8-2007 in the matter of SHRI ROOPCHHAYA COLOUR STUDIO Versus COMMR. OF C. EX., HYDERABAD reported in 2008
In this decision also, tribunal has allowed the deduction of value of goods / material from the gross value.

Section 268A must be omitted

Section 268A must be omitted otherwise the revenue will have restricted rights of appeal in some circumstances

Departmenal appeals a review in view of recent judgment dated 21.07.08
Recent judgment:
Recently in the context of provisions of the Income Tax Act, 1961 also the Supreme court (larger Bench of three judges on a reference) has in case of C.K. Gangadharan & Anr. Versus CIT Cochin held that an appeal can be filed in another year or in another case, even though revenue did not challenge judgment on similar issue at an earlier instance, if there was just cause for not filing an appeal.The para 13 of the judgment reads as follows:
13. In answering the reference, we hold that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts.
Thus the court has laid down three circumstances namely:
When there is just cause for filing appeal,
When it is in public interest to do so.
When a pronouncement from higher court is desirable when divergent views are taken by Tribunals or High Courts.
In which an appeal before further higher forum can be filed on an issue which was decided against the revenue in any earlier order/ judgment and it was not challenged.
The Supreme Court has also not doubted the law laid down in earlier judgments in which it was held that when the revenue has accepted judgment in another case, on the same issue revenue cannot be permitted to agitate the issue as the precedence has attained finality.
The order of reference as appears in the preamble of the judgment of the larger bench reads as follows:
"xxx xxx xxx In view of the aforesaid position, we are of the opinion that matter requires consideration by a larger Bench to the extent whether revenue can be precluded from defending itself by relying upon the contrary decision. We make it clear that we are not doubting the correctness of the view taken by this Court in the cases of Union of India v. Kaumudini Narayan Dalal (2001)10 SCC 231, CIT v. Narendra Doshi (2004) 2 SCC 801 and CIT v. Shivsagar Estate (2004) 9 SCC 420 to the effect that if the revenue has not challenged the correctness of the law laid down by the High Court and accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assesses, without just cause. Registry is directed to place the papers before the Hon'ble Chief Justice of India for appropriate orders."
Thus it is seen that in earlier judgments as above referred by the Supreme Court as well as in the case of Berger Paints, the supreme Court always used the expression "without just cause". Therefore, non filing of an appeal for some just cause, will not prevent the revenue or the assessee to file appeal on similar issue in another year or in another case.
Supreme Court considered some of earlier judgments on similar issues, important excerpts with high lights are given below::
The case of Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Ors. (2006 (3) SCC 1), in which it was noted as follows:
that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any
principle of resjudicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which,failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction.
A decision can be set aside in the same lis on a prayer for review or an application for recall or Under Article 32 in the peculiar circumstances mentioned in Hurra v. Hurra (2002 (4) SCC 388). As we have said overruling of a decision takes place in a subsequent lis where the precedential value of the decision is called in question. No one can dispute that in our judicial system it is open to a Court of superior jurisdiction or strength before which a decision of a Bench of lower strength is cited as an authority, to overrule it. This overruling would not operate to upset the binding nature of the decision on the parties to an earlier lis in that lis, for whom the principle of res judicata would continue to operate. But in tax cases relating to a subsequent year involving the same issue as an earlier year, the court can differ from the view expressed if the case is distinguishable or per incuriam. The decision in State of U.P. v. Union of India (2003 (3) SCC 239) related to the year 1988. Admittedly, the present dispute relates to a subsequent period. Here a coordinate Bench has referred the matter to a Larger Bench. This Bench being of superior strength, we can, if we so find, declare that the earlier decision does not represent the law. None of the decisions cited by the State of U.P. are authorities for the proposition that we cannot, in the circumstances of this case, do so. This preliminary objection of the State of U.P. is therefore rejected."
5. In State of Maharashtra v. Digambar (1995 (4) SCC 683), the position was highlighted by this Court as follows:
" the contention of the appellants could not be rejected. Non-filing of an appeal, in any event, would not be a ground for refusing to consider a matter on its own merits. (See State of Maharashtra v. Digambar 1995 (4) SCC 683).
In State of Bihar and Ors. v. Ramdeo Yadav and Ors. (1996 (3) SCC 493) wherein this Court noticed Debdas Kumar (supra) holding:
In the similar circumstances, this Court in State of Maharashtra v. Digambar, (1995) 4 SCC 633) and in State of West Bengal v. Debdas Kumar,(1991) Suppl. SCC 138), had held that though an appeal was not filed against an earlier order, when public interest is involved in interpretation of law, the Court is entitled to go into the question."
In Chief Secretary to Government of Andhra Pradesh and Anr. v. V.J. Cornelius and Ors. (1981 (2) SCC 347) it was observed that equity is not relevant factor for the purpose of interpretation. It will be relevant to note that in Karam Chari v. Union of India and Ors. (2000 (243) ITR 143) and Union of India v. Kaumudini Narayan Dalal and Anr. (2001 (249) ITR), this Court observed that without a just cause revenue cannot file the appeal in one case while deciding not to file appeal in another case. This position was also noted in Commissioner of Income Tax v. Shivsagar Estate (2004 (9) SCC 420).
The order of reference would go to show that same was necessary because of certain observations in Berger Paints India Ltd. V. Commissioner of Income Tax, Caluctta (2004) 2 SCC 42). The decision in Union of India and Ors. v. Kaumudini Narayan Dalal and Anr. (2001 (10) SCC 231) was explained in Himalatha Gargya v. Commissioner of Income Tax, A.P. and Anr. (2003 (9) SCC 510) at para 14. It has been stated in the said case that the fact that different High Courts have taken different views and some of the
High Courts are in favour of the revenue constituted "just cause" for the revenue to prefer an appeal. This Court took the view that having not assailed the correctness of the order in one case, it would normally not be permissible to do so in another case on the logic that the revenue cannot pick and choose. There is also another aspect which is the certainty in law.
In answering the reference, we hold that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or
for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts.
Is section 268A exhaustive:
It can be said that section 268A is exhaustive and it provides scope for filing appeal in another case or another year only when in earlier matter, which attained finality, the revenue did not file appeal due to lower revenue impact.
This is because a view can be taken that only in the circumstances stated in S. 268A, the revenue can prefer an appeal on similar matter and in no other circumstances. Therefore, in view of S.268A, the revenue may have restricted freedom to file appeal in such circumstances. In absence of S. 268A the freedom could be more extensive. Therefore, it seems that in a case where revenue has not preferred an appeal, though the amount of revenue involved was higher, then on similar issue revenue will not be entitled to prefer appeal in another case or another year on the grounds of just cause, or public interest or to seek final determination of law.
In view of discussion in earlier article and also the latest views expressed by the Supreme Court, the author again re-iterate that it was not necessary to insert new section 268A in the I.T.Act. By insertion of S. 268A, it appears that the freedom of the revenue to file an appeal on similar matter which has attained finality may be restricted. Therefore, S.268A must be omitted.



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e-payment clearance

Real time e-payment clearance on cards

Customers may soon be able to make payments towards utility services or equated monthly installments on loans on a real time basis. The Reserve Bank of India is looking at expanding the reach of the electronic clearing service to a national scale. Currently, this service is available only at 15 centres, where the central bank manages the clearing house operations. Addressing a conference on mobile payments, the central bank’s executive director, RB Barman said: “While the national electronic fund transfer takes one to two hours for settling the transaction, this would help finish the process in a few seconds. We are also looking at releasing the final guidelines on mobile banking over the next fortnight.” Mr Barman said that 53 banks have joined in the pilot project for cheque truncation services in the National Capital Region. He added that RBI may extend the cheque truncation service to facilitate clearing of cheques across different cities. Customers can transfer funds from one bank to another, through the ECS i.e. by routing the transaction through a clearing house. Typically, many corporates use the ECS for bulk transfers of salaries, interest and dividend payments. Retail customers at banks can also use the ECS debit facility to make utility payments towards telephone or electricity, taxes or loan installments.
On the other hand, the NEFT system helps transfer funds across India between bank branches, but the funds get credited within few hours of the execution either on the same day or on the following day, depending upon when the transaction is settled. Till date, 46,363 branches of 87 banks are covered under the NEFT system, which RBI is looking at widening further. The central bank launched the NEFT system in November 2005. While RBI gives banks the option to decide whether they wish to join the network for real time gross settlements, rolling out ECS systems on a national scale will automatically bring all branches under a single platform. PayPal, a Singapore-based online payments solution provider, is also in talks with RBI. The central bank has sought from PayPal, certain insights on how online payments are regulated globally, with special reference to know-your-customer norms. Also present at the conference, TechProcess Solutions’ CEO, Bikramjit Singh, which acts as a intermediary between banks and merchant establishments, said, “most of the transactions still cater to the higher-end needs of customers and in that sense, electronic payments have still not penetrated to the ground level masses. The main deterrent under mobile banking is the lack of regulatory norms as of now.”

Investment in higher education

Govt to ease investment norms in higher education

Private and foreign corporate investment may soon get to flow into Indian higher education with the government considering a move to reform policy that hinders such financing.

Currently, it is not possible for non-profit companies under Article 25 of the Companies Registration Act — like industry associations — to set up an institution and get university status and recognition from the University Grants Commission.
Educational institutions in India can be set up only by trusts, societies and charitable companies, but the profits cannot be taken out of the institution and have to be reinvested. Not only does this restriction hamper expansion, it also encourages promoters to resort to creative accounting to take out profits from the institutions.
Now, under encouragement from an influential political ally from Maharashtra, the United Progressive Alliance government is expected to clarify this clause, sources told Business Standard.
There is also renewed hope for a Bill allowing foreign universities and institutions into India to be tabled in Parliament, judging by Human Resources Development Minister Arjun Singh’s remarks at a conference of state education ministers two days ago.
The Left parties were the principal opponents of the Foreign Education Providers (Regulation) Bill, which was cleared by the Cabinet in 2007 but never introduced in the Lok Sabha although it was listed in the agenda papers.
“We have tried to accommodate some of the concerns. We will try to introduce the Bill in the Lok Sabha session beginning August,” Singh said. The Bill seeks to regulate foreign institutions setting up campuses in India. A contentious issue is whether caste-based reservations would apply to these institutions.
Both Oxford and Stanford Universities have evinced interest in setting up campuses in India but have been hesitant about moving forward until they are clear about the degree of regulation, funding and other issues.
Experts say the moves would provide clarity on funding of higher education institutions by overseas entities. "This will probably provide funding clarity for foreign institutions like charitable organisations or NRIs wanting to set up facilities in India.
The passage of the Bill shall give a boost to foreign universities and enhance competition in the country. It will be survival of the fittest, although care will have to be taken to ensure that fly-by-night operators are kept out and quality is maintained," said Vidya Yeravdekar, principal director, Symbiosis Society.
Those supporting the opening up of the higher education sector to foreign investment argue that India should open its doors to investment before the World Trade Organisation forces it to do so.
However, the HRD ministry has argued that WTO pressure for foreign investment in education may take time coming as several Islamic countries are opposed to such a move.
Whether the Foreign Education Bill will involve the appointment of a regulator or afford more autonomy to foreign institutions will have to be decided by the government before it is tabled in Parliament.

source :-business standard ,27.07.2008

slapp on colour TV picture tubes

Anti-dumping duty slapped on colour TV picture tubes

source- BUSINESS STANDARDS , 27.07.2008

The government today slapped a steep anti-dumping duty on imported picture tubes for colour TVs from China, Malaysia, Thailand and Korea after it found that these countries were “dumping” the product into India.
The duty will range between Rs 878 and Rs 4,369 on a cathode ray colour picture tube (CPT) depending on the size of screen.
The companies affected by the notification of the Department of Revenue include Samsung (Malaysia), LG Philips (Korea), Irico Group Electronics (China), Shenzen Samsug (China).
The decision was based on preliminary findings of the designated authority in the commerce ministry. The findings showed that the goods were being exported to India below their normal value, causing “material injury to the domestic industry”. It was also found that the “injury had been caused by the dumped imports from the subject countries”.
The consumer electronics industry reacted sharply to the government’s decision saying it would make colour TVs more expensive.
“The prices of colour television are set to go up due to the duty,” said Consumer Electronic Appliances Manufacturer Association (CEAMA) President R Zutsi. However, the impact would differ depending on the size of the TV.