Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Publish Date: 30 Nov, 2009
Print   |    |  Comment

Johnny and Service Tax Refund Part - VI

 

Johnny and Service Tax Refund Part - VI

                                                                                      

                          By: -                          

CA. Pradeep Jain

Siddharth Rutiya

 

Visit us at: www.capradeepjain.com

In this unbroken series of articles on the issues relating to the problems faced by exporters under refund claim mechanism we herein are unveiling the VI th part of the same. Herein we are uncovering the problems existing in the Service tax refund mechanism under Business Auxiliary Services provided by commission agent to cause sale of goods exported (Section 65[105][zzb]). The problems faced by the exporters are being elaborated with the means of humorous poems and conversation between Johnny (an assessee) and his father but the main motive is to bring out the problems faced by exporters.

Johnny and Jill went up the hill, to get the refund order
Johnny came back with a lack
And Jill came hopeless after.

The assesses claiming refund orders under Business Auxiliary services to cause sale of goods exported are experiencing great problems in getting their refund orders passed on various departmental justifications that are argued by them. These unnecessary arguments are not only annoying and irritating the assessees but also deprives away the faith of assessees on the refund mechanism designed by the Government. Such reasons on which the department is refusing the refund claims on the said services are being written out hereunder as follows: -

 

Johnny-Johnny!  Yes papa!

Got the refund?

No Papa,

Telling lies?

No Papa,

What’s the reason?

This papa: -

 

Johnny says:  I went to the department to get the refund for Business auxiliary service availed by me in relation to export of goods, but department said: -

Johnny-Johnny go away,
Come again another day.
Your refund order has following Flay: -

The refund under this service is allowed only if the Commission agent is located outside India and is engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported. However there was no agreement annexed with the refund claim and further the amount of commission paid or payable to the commission agent is not specified in the shipping bill. These are the pre conditions for availing the benefit of refund claim.

Johnny’s View: 

This is just a means of requirement that can be neglected as it is a fact that if we are paying the commission on sales basis to a foreign agent for his services as regards the finding of foreign clients then definitely the service rendered by him are related to export of goods. Further, this is a set philosophy that no exporter will pay to a foreign agent for sales made within India and the service tax paid in relation to such commission is undoubtedly related to export of goods.

Further as regards the issue related to specifying the amount of commission paid or payable to the commission agent in the shipping bill is concerned, we submit that the amount of commission to be paid or already paid has already been specified in the shipping bill and the copy of the same is enclosed along with the refund claim. However, the said conditions are cleared but the department does not agree and is denying the claims.

Johnny says:  I went to the department next day again with the corrections and further supporting but department said: -

Johnny-Johnny go away,
Come again another day.
Your refund order has following more flay: -

The pre condition for grant of refund claim is that the Commission sought to be remitted should not be for exports of a canalized item, project exports, or exports financed under lines of credit extended by Government of India or EXIM Bank, or exports made by Indian partners towards equity participation in an overseas joint venture or wholly owned subsidiary. There was no evidence or documentary proof from the assessee’s side to prove that such a condition is satisfied. Hence, the refund claim is subject to denial until assessee proves for the fulfillment of such condition.

Johnny’s View:

We have clarified to the department that the exports made by us were not financed under lines of credit extended by Government of India or EXIM Bank. Further, there were no exports which were made by the Indian partners towards equity participation in an overseas joint venture or wholly owned subsidiary. Thus, the issues raised by the departmental officers were vague and futile. The department said that you should provide an undertaking in this regard to process your refund claim further.

Johnny says:  I went to the department next day again with the further corrections but department rejected saying: -

Johnny-Johnny go away,

You won’t get refund anyway.
It has following more flay: -

 

One of the conditions for the Refund of service tax is that it shall be restricted to actual amount of service tax paid or service tax calculated on 2% of FOB value of export goods, whichever is less. Thus, the claim of refund of service tax will not be allowed as the same exceeds the maximum amount of refund i.e. 2% of FOB value.

Continuously, the documents evidencing actual payment of commission to the commission agent were not enclosed with the refund claim. Further, the invoices issued by the agent do not fulfill all the requirements specified under Rule 4A like category of service, Description of service, valid Invoice Number, Service tax rate, Service tax registration number and other alike things.

Johnny’s view: -

The view taken by the department is incorrect. The amount of refund claim does not exceed the maximum amount allowed as per the conditions specified. The refund claim amount is within the limits of 2% of FOB value and as such the refunds are sought to be allowed.

It was told to them that the service provider is a foreign national and Service Tax Act is not applicable on him. The liability to pay service tax is on service recipient. The service tax has been paid and proof of the same is enclosed. The department said that the service tax has been paid in cash. Instead, it was paid from Cenvat credit and as such refund can not be allowed to you. It was pleaded that there are number of decisions wherein it is held that the service tax payment can be made from Cenvat account. Moreover, the department is deciding the refund and not the issue of payment of service tax. But the department did not agree.

 

Fruitless again & again;

Johnny now in grief and pain!

Refund order now a dream;

His efforts have downstream!

 

Via this article the sole endeavor is to picturize the problems faced by assesses in getting the refund order as against the Business Auxiliary services relating to the Commission on sales to Foreign agents. With this entertaining and rhythmical article we summarize that the present situation and mental state of assesses alleging refunds against export of goods is alike to the situation of Johnny as pointed out in the poem.

There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article……..

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com