Faq's

WHAT ARE THE FREQUENCY NORMS OF AUDIT FOR SERVICE TAX ASSESSES ?

Director General of Audit, New Delhi has prepared Service Tax Audit Manual, 2010. As per the guidelines, tax payers whose annual service tax payment (including cash and CENVAT) was Rs.3 crore or more in the preceding financial year may be subjected to mandatory audit each year. It is preferable that Audit of all such Units is done by using Computer Assisted Audit Program (CAAP) techniques. The frequency of audit for other taxpayers would be as per following norms:-

  • Taxpayers with Service Tax payment above Rs.3 crores (Cash + CENVAT) (MANDATORY UNITS) - to be audited every year.
  • Taxpayers with Service Tax payment between Rs.1 crore and Rs.3 crores (Cash + CENVAT) - to be audited once every two years.
  • Taxpayers with Service Tax payment between Rs.25 lakhs and Rs.1 crore (Cash + CENVAT) - to be audited once every five years.
  • Taxpayers with Service Tax payment upto Rs.25 lakhs (Cash + CENVAT) - 2% of taxpayers to be audited every year.

The Audit selection guidelines, therefore, would apply to the non-mandatory taxpayers, forming part of the discretionary workload. These taxpayers should be selected on the basis of assessment of the risk potential to revenue. This process, which is an essential feature of audit selection, is known as Risk Assessment. It involves the ranking of taxpayers according to a quantitative indicator of risk known as a �risk parameter. It is also suggested that the taxpayers whose returns were selected for detailed scrutiny, may not be taken up for Audit that year, to avoid duplication of work. Similarly, the taxpayers who have been selected for Audit, may not be taken up for detailed scrutiny of their ST-3 Returns during that year.

The Service Tax Audit Manual, 2010 is in the process of finalization and publication by D.G. Audit, New Delhi. In the circumstances, till the same is published, the existing instructions on audit shall continue.

WHAT IS THE LIABILITY OF SERVICE TAX ON RECEIPT OF SERVICE FROM OVERSEAS ?

There are certain exporters who take services of Overseas Agents and in turn pay commission to them. Such exporters become liable to pay Service Tax on reverse charge method on import of service. Various Commissionerates of the Service Tax department have raised such demands for the period from 1.01.2005 or even earlier. Now the CBEC has decided to levy service tax only with effect from 18.04.2006 (i.e.) from the date of enactment of section 66-A of the Finance Act, 1994. Hence, any demand of service tax on the amount paid to Overseas Agencies prior to 18.04.2006 will not be maintainable and hence, this fact may be taken to the notice of the authorities and accordingly, the demands may be closed as such. Following instructions have been issued by the Board office to the offices of all Chief Commissioners and Commissioners of Central Excise and Service Tax which may kindly be perused.

To,

  • All the Chief Commissioner of Central Excise/LTU
  • All Commissioner of Central Excise/Service Tax the Chief Commissioner of Central Excise/LTU

Sir/Madam,

Sub: Applicability of service tax on taxable services provided by a non-resident or a person located outside India to a recipient in India-reg.

Kind attention is invited to instruction F No. 275/7/2010-CX8A, dated 30.6.2010, wherein the Board had communicated its view that services tax on a taxable service received in India, when provided by a non-resident/person located outside India, would be applicable on reverse charge basis with effect from 1.1.2005, and that the ratio of judgement in M/s Indian National Shipowners Association (INSA) case [2009 (13) STR 235 (Bom)] would not apply to such cases. Further, direction was issued to field formations to defend the levy of service tax on such services for the period on or after 1.1.2005, as post INSA judgment, it has been held by the High Courts/Tribunal in a large number of cases, applying ratio thereof, that service tax on such services is leviable only w.e.f. 18.4.2006. However, the appeals filed by the department before the Hon'ble Supreme Court, for defending the levy of service tax on such services w.e.f. 1.1.2005, have been dismissed recently (subsequent to the issuance of said instruction dated 30.6.2010) in the following cases.

 

  • SLP (C) No. 29539 of 2010 in CCE Vs Bhandari Hosiery Exports Ltd
  • SLP (C)No. 18160 of 2010 in CST Vs Unitech Ltd
  • SLP (C) No. 34208/09 of 2010 in UOI Vs S R Batliboi & Co.
  • SLP (C)No. 328/332 of 2011 in UOI Vs Ernst & Young
  • SLP (C) No. 25687-25688/2011 in CCE Vs Needle Industries
  • SLP (C) No. 25689-25690/2011 in UOI Vs SKM Engg Products

Further, Review Petition No. 1686 of 2011 filed in the case of Bhandari Hosiery has also been dismissed by the Hon'ble Supreme Court vide order dated 18/8/2011.

2. In view of the aforementioned judgments of the Hon'ble Supreme Court, the service tax liability on any taxable service provided by a non resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of section 66A of the Finance Act, 1994. The Board has accepted this position. Accordingly, the instruction F No. 275/7/2010-CX8A, dated 30.6.2010 stands rescinded.

3. Appropriate action may please be taken accordingly in the pending disputes.

WHAT ARE THE GUIDELINES TO BE FOLLOWED FOR STUFFING OF EXPORT CONTAINERS UNDER SUPERVISION OF CENTRAL EXCISE OFFICERS ?

Guidelines have been issued by Central Board of Excise and Customs from time to time through different Circulars, Notifications etc. for stuffing of export containers under supervision of Central Excise Officers. The same are compiled below and must be followed.

Chapter 7 and 8 of CBEC's Central Excise Manual, inter-alia, provide that the exporter of excisable goods may request the Superintendent/ Inspector of Central Excise having jurisdiction over the factory or warehouse or approved premises for examination and sealing of the export goods at the place of dispatch, 24 hours in advance or such shorter period as may be mutually agreed upon. Notification No. 19/2004-CE(NT) dated 6th September 2004, issued under Rule 18 of the Central Excise Rules, 2002, inter-alia, provides that registered manufacturer exporters and merchant exporters who procure the goods directly from the factory or warehouse for export under claim of rebate, have the option of getting the export goods sealed by the Central Excise officer at the place of dispatch. Further, the merchant - exporters other than those procuring the goods directly from the factory or warehouse are also allowed to export the goods sealed at the place of dispatch by a Central Excise Officer. The application for examination and sealing of export goods at the place of dispatch is required to be made to the jurisdictional Superintendent/ Inspector of Central Excise. In terms of Notification No. 42/2001-CE (NT) dated 26th June 2001, applicable to export under bond in terms of Rule 19 of Central Excise Rules, 2002, the exporter shall approach the concerned Superintendent or Inspector of Central Excise.

Vide Circular No. 736/52/2003-CX dated 11th August 2003, the facility of self-sealing and self-certification has been extended to all categories of manufacturer- exporters subject to compliance with existing procedures. Vide Circular No. 860/18/2007-CX dated 22nd November 2007, it has been prescribed that in case of exports under free Shipping Bills, i.e., Shipping Bills where no export benefits are being sought, the manufacturer- exporter shall mandatorily resort to self-sealing of export containers and the Central Excise Officer shall not entertain any request for stuffing and sealing of export containers, in their presence in such cases.

In view of above existing instructions, it is reiterated that the facility/ option of examination and sealing of export containers by the Central Excise Officers at the place of dispatch is available to both manufacturer- exporters (except when the export is on free Shipping Bill) and merchant-exporter in respect of the goods exported in terms of Rule 18 or 19 of the Central Excise Rules, 2002. Such examination, stuffing and sealing of export containers by the Central Excise Officers are permitted at the factory or warehouse or any other approved premises.

In respect of the both excisable and non excisable goods the exporters are required to obtain one time permission from the concerned custom formation in terms of the Custom Circular No. 60/2001-Cus dated 1st November 2001, and Circular No. 20/2010-Cus dated 22nd July 2010. On the basis of the said permission given by the Commissioner of Customs, the Central Excise officers of the jurisdictional range had been undertaking the work of sealing the export goods on the request made by the exporters.

The examination, stuffing and sealing of export containers at the place of dispatch are required to be done by the jurisdictional Central Excise Superintendent/ Inspector. The application for examination and stuffing of export containers at the place of dispatch has to be made to the jurisdictional Superintendent/ Inspector of Central Excise, 24 hours in advance or such shorter period as may be mutually agreed upon. The facility of online scheduling of factory stuffing by Central Excise Officers has been prescribed by the Board vide Circular No. 934/24/2010-CX dated 25th August 2010, vide which the exporter can seek such scheduling by sending an e-mail to the range officer. It is reiterated that exporter needs to correspond only with the range officer for such stuffing. Keeping in mind these requirements, the Chief Commissioner will ensure that the Commissioner should suitably augment staff strength available with range by making necessary administrative arrangements.

In respect of the services provided by the Central Excise Officers at any premises other than the premises which are not the normal work premises of that officer, i.e. for export from premises other than those registered with the Central Excise officer, MOT charges will be payable at the applicable rates even if the said services are being provided during the normal working hours. In case of the services provided beyond the normal working hours MOT charges as applicable will be payable for all the premises whether registered with the Central Excise or not.