CAs & CWAs(nominated u/s 72A) are authorised for service tax audits by department.

CBEC:

CAs & CWAs(nominated u/s 72A) are authorised for service tax audits by department.

Statutory provisions--
Rule 5A(2) of Service Tax Rules, 1994 authorises department to conduct audit by CAG or any audit party deputed by Commissioner & the assessee was bound to produce the specified documents within 15 days from date of demand( of the prescribed documents) the said auditor.

Legal History:

Various judicial pronouncements have been made recently in the context of service tax audits. Reliance in this regard may be placed on :

ACL Education Centre Pvt. Ltd. & Ors. Vs. Union of India [2014-TIOL-120-HC-ALL-ST] - Hon'ble Allahabad High Court held that audit under service tax is to be conducted by Chartered Accountants/ Cost Accountants only and not by officers of the Department 

SKP Securities Ltd. Vs. DD (RA-IDT) & Ors. [2013-TIOL-38-HC-KOL-ST] - Hon'ble Kolkata High Court held that audit of private assessee can't be undertaken by CAG 

Travelite (India) Vs. Union of India & Ors.- Hon'ble Delhi High Court
held that rule 5A(2) is bad in law.

Amendment:

Now vide N/N 23/2014- ST, rule 5A(2) has been amended and the pronouncement of Allahabad High Court has been followed principaly & CAs/CWAs have been made empowered to conduct service tax audits.

Furthermore, earlier limit of 15 days for production of specified documents has now been replaced with the time limit specified by the concerned audit party/CAG/CAs/CWAs, as the case may be.

The said notification may be accessed from the following link herein below :

http://www.servicetax.gov.in/notifications/notfns-2014/st23-2014.htm

Read more »

Reversed Cenvat credit can be re-taken even after six months

By C.A Pratik Anand, ACA

The CBEC has issued circular No. 990/14/2014-CX-8 dt. 19/11/2014, wherein it has clarified that the cenvat reversed or amount paid for reversal in respect of cenvat credit wrongly availed where the conditions relating to availment of cenvat credit were not fulfilled, can again be claimed as input credit on the fulfilment of prescribed conditions even after six months from the date of issue of a document (i.e invoice challan etc) prescribed under rule 9(1) of Cenvat Credit Rules’2004.

The CBEC has clarified that the limit of availing cenvat credit within six months from date of the issue of document under rule 9(1) is applicable where cenvat credit is taken for the first time. It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in the Cenvat Credit Rules’2004.

The situations wherein this clarification is applicable is as follows:

    1)      Newly inserted third proviso to Rule 4(7) provides that if the value of input service as well as service tax thereon is not paid within a period of three months from the date of the invoice etc., the manufacturer or the service provider who has taken credit on such input service has to make payment of an amount equal to the CENVAT Credit availed. It is further clarified that said payment of reversal may be made by cash or through debiting Cenvat credit. This proviso does not apply to cases where 100% of the service tax is to be paid by the recipient.

    Therefore if a manufacturer or service provider could not pay the value of input service availed as well as the service tax thereon within 3 months of raising of invoice then the CCR has to be reversed. The CCR can be re-taken on payment of the amount of service as well as the service tax thereon even after expiry of six months from the date of invoice.

  

     2)      According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account i.e cenvat credit can be re-taken even after expiry of six months from the date of invoice for the purchase of input or the capital good.  

    3)      Rule 4(5)(a) of CCR, 2004 prescribes that in case inputs sent to job worker are not received back within 180 days, the manufacturer or service provider is required to pay an amount equal to credit taken on such inputs in the first instance. However, when the inputs are subsequently received back from job worker, the amount so paid can be re-credited in the cenvat credit account even though the goods are received back from the job-worker after expiry of six months from the date of original invoice.

Hope you find the above information relevant and useful in your daily practice  

The author is a CA in practice at Delhi and can be contacted at: E-mail: capratikanand@gmail.com Website: www.capratikanand.com Mobile: +91-9953199493

Read more »

Changes in Negative List & Service Tax Rules wef 01.10.2014

Service tax Notification no. 18/2014-ST & 19/2014- ST dated 25th Aug'14 Effective  date  of amendment-1st Oct'14

SERVICES PROVIDED BY RADIO TAXIS:

• Earlier,radio taxis were excluded from the purview of service tax by virtue of section 66D(o)(vi) of Finance Act,1994;
• However, in the Finance (No.2) Act, 2014, enacted on 6th  August, 2014, the said section was amended & the "radio taxis" got deleted,resulting in levy of service tax thereupon.  However, effective  date  wasn't  notified.    Now, the  same has been notified as 1st October,2014;
• At the same time, abatement of 60% shall be allowed in such cases, as provided in entry  no. 9/9A of  N/N  26/2012-ST, amended by N/N 08/2014-  ST, subject to the condition that no CENVAT is claimed.
• Hence, effective rate of service tax shall be 4.944%.

SERVICES PROVIDED BY RADIO TAXIS:

• As per the erstwhile provisions contained in section 66D(g) of Finance Act,1994, sale of space for advertisement, other than radio & television, used to remain excluded from the levy of service tax.
• In the Finance (no. 2) Act, 2014, all advertisements, other than in print media, were made  subject  to  service tax, though  effective  date  of  applicability  of  amended provisions, was not defined.
• Now,the same has been notified as 1st October, 2014.

DETERMINATION OF RATE OF EXCHANGE: 

• From 28-May-2012, section 67A was inserted to determine the rate of exchange to be opted  for the purpose of determination  of value of the taxable service & such rate  was  construed  to  be  the  rates  notified   by  CBEC  from  time  to  time,  in accordance with section 14 of Customs Act,1962.
• This had  led  to  various  practical  difficulties  in  the  industry,  since they  had  to separately maintain  a track record  as per CBEC rates for the  purpose of valuing import  or export of service, while in financial statements the rates were considered on a different basis(e.g. RBI rates, Bank TT buying/selling rate, etc.)
• Now, w.e.f. 1st October,2014,rule 11 has been inserted in Service Tax Rules,1994 to consider the rate of exchange as per GAAP on the date when Point of taxation arises in terms of the Point of Taxation Rules, 2011
• Post  this amendment, an ambiguity  may arise as to whether  the same rates may also be used for valuing export of services,or department may take the other view?

 t  This Article has been share by CA Sumit Grover. He can be reached at sumitgrover.ca@gmail.com

Read more »