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29 December, 2012

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Service Tax & DVAT - Dec'12

Several Important judgements have been pronounced by Hon’ble High Courts of Mumbai and Delhi including addressing the issues of service tax on reimbursements of expenses and utilisation of Cenvat for payment of service tax under reverse charge under section 68(2).

DVAT quarterly dealers mandate by department for computation of limit of Rs One lac read with circular dated 4th October, 2012. HVAT Department Clarification u/s 56(3) (in case of Nestle India) for taxability of Intangible Goods.  


  1. Extension of Mega Exemption Notification
The Central Government has extended the scope of mega exemption notification vide entry 26A.  The service tax has been exempted on Services of life insurance business provided under following schemes:-
  1. Janashree Bima Yojana (JBY); or
  2. Aam Aadmi Bima Yojana (AABY);”

(Notification No.49/2012 - Service Tax dated 24th December, 2012)

  1. No Service Tax on Reimbursements {Delhi – HC}
The Hon’ble Delhi HC has held that It has been held that Rule 5(1) goes beyond the charging provisions and cannot be upheld.
Rule 5(1) provides for taxing the expenditure or costs incurred by the service provider in the course of providing the taxable service. It is held that such amount can never be considered as the gross amount charged by the service provider “for such service” provided by service provider. Held that, Rule 5 (1) of the Rules runs counter and is repugnant to Sections 66 and 67 of the Act and to that extent it is ultra vires.

(Intercontinental Consultants and Technorats (P). Ltd. Versus U.O.I. & ANR.- 2012 (12) TMI 150 - DELHI HIGH COURT)

  1. Cenvat Utilisation allowed for Payment of Service Tax Under Reverse Charge {Delhi-HC}
The Hon’ble Delhi HC has held as decided in Nahar Industrial Enterprises Ltd and Others [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] & para 2.4.2 of CBEC's Excise Manual of Supplementary Instructions shows that there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services.
In essence, the provision affirmed by Delhi HC is that the Cenvat Credit can be utilised for payment to be made under Reverse Charge.

(Commissioner of Service Tax  v. Hero Honda Motors Ltd. - 2012 (12) TMI 734 - DELHI HIGH COURT)

  1. Consignment Note is a Must – Goods Transport Agency {Delhi – CESTAT}
The Hon’ble Delhi CESTAT has held that the consignment note is a must for any goods transport agency to be held so. In essence, when consignment notes are not issued by the operator they cannot be considered as a "Goods Transport Agency". The mere fact that the operator is doing activity of transportation cannot make the operator a "Goods Transport Agency". So the operators in this case cannot be considered as "Goods Transport Agencies".
(Birla Ready Mix v. Commissioner of Central Excise, Noida - 2012 (12) TMI 736 - CESTAT, NEW DELHI)

  1. Commission on Inward Remittance is Export of Service {Delhi – CESTAT}
The Hon’ble Delhi CESTAT in larger bench order has held that where the inward remittances are made by the foreign remitter and commission is charged from him by foreign entities which is shared with their Indian counterparts. Such commission of Indian counterparts is eligible for exemption under Export of Service Rules, 2005.
Further, It is been held that the service receiver is not the Indian remittee in such cases but the person who has paid the commission i.e. Foreign Remitter.

(M/s Paul Merchants Limited & Others v. CCE, Chandigarh - 2012 (12) TMI 424 - CESTAT, DELHI (LB))
Value Added Tax / Sales Tax (Delhi & Haryana) – DEC’12
  1. DVAT-51 Due Date Extended
The due dates for furnishing the reconciliation return vide form DVAT -51 has been extended to 28th February, 2013. Also, the date for furnishing of the portion marked 'original' of the Declaration Forms 'C', 'E-I' or 'E-II', 'F', 'I', 'J', and 'H' respectively, for the year 2011-12 has been extended till 28th February, 2013.

(Order No.F.3 (33)/P-II/ VAT/ Misc./2006/ Dated: 26.12.2012)

  1. DVAT - TDS(WCT) to be considered in One Lakh Limit for Quarterly Dealers
Dealers having ‘Quarter’ as tax period and having net tax liability exceeding Rupees One lakh during the last financial year or current financial year were directed to deposit tax on monthly basis vide Order dated 04.12.2012.
It is clarified that for calculating the tax liability of Rupees One lakh, as prescribed vide the said Order, the tax payable under the Delhi Value Added Tax Act, 2004 and that under Central Sales Tax Act, 1956 is to be considered. Further, the Tax Deducted at Source (TDS) shall not be excluded for calculating the total tax liability. Hence, TDS, wherever due, plus the balance tax payable by dealer directly would be considered for calculating the Rupees One lakh threshold limit. Due date for Oct’12 & Nov’12 is 21st December, 2012.

(Circular 26/2012-13 Dated: 14.12.2012)

  1. HVAT – VAT on Intangible Goods is Taxable {HVAT Department}
It has been clarified by the Haryana VAT Department vide clarification dated 30th November, 2012 that where the transaction of sales of recipes, formulas and result of developing new material on CD’s, E-mails and by post will be treated as goods under Section 2(r) of Haryana Value Added Tax,2003.

(Memo 2007 Dated: 05.11.2012)

  About the Author:
   Author is practicing Chartered Accountant in New Delhi and specialising in Indirect Taxes, Corporate Laws and Management Advisory. He can be reached at                             

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