ABSTRACT
Chemical is right at the core of advance industrial systems, which is why it has attained a serious concern for disaster management. Chemical disasters are often traumatic in impact on humans usually resulting in casualties along with damage to nature and property. Unlike natural disasters, preventive and regulatory measures assume greater significance when we talk about chemical disasters. India too, has witnessed several chemical disasters in the past 50 years, highlighting the need for safeguards against such events. This paper’s focus lies on two of the most dangerous gas leaks India has witnessed until this date, i.e. the Bhopal Gas Leak and the Vizag Gas Leak. The author discusses in detail what went wrong prior to and during the Bhopal Gas leak, which is followed by an explanation on how the safety initiatives have evolved after the 1984 incident. In the next section, the author tries to decode the Vizag leak of 2020 with emphasis on how the company could bypass the safety norms in place. The author then discusses the gap in the present framework governing Chemical Disasters (including gas leaks) and proposes certain measures that could be implemented for effective management of such disasters.
INCOME TAX – INTERNATIONAL TAXATION
Tax Residency Certificate – DTAA Benefits
The Punjab and Haryana High Court, has held that Tax Residency Certificate issued by a foreign country can be considered valid for the purpose of claiming benefit under the Indo – Mauritius DTAA. The Court reversed the AAR Ruling and relied upon CBDT Circular No. 789 to the effect that certificate of residence issued by the Mauritius Authorities constitute sufficient evidence for residential status.
We are pleased to share our June 2022 edition of the GST Bulletin covering recent amendments/ updates in the realm of GST.
This issue covers in detail the following:
1. Judicial Updates
• No GST on services by security manager located outside India for subscription to secured notes placed in USA.
• Concessional GST rate of 0.75% on construction applies to promoter and not to sub-contractor.
• Ocean freight levy violates 'Composite supply' principle under GST.
• Secondment of employees by Overseas Group Company is covered under Manpower Supply & liable to service tax.
• Charitable clubs imparting sports training exempt, however entrance/membership fees taxable.
2. Notifications/ Circulars
• Due date for filing GSTR-3B for April 2022 extended.
• Due date for payment of tax in GST PMT-06 for April 2022 extended.
• Late fee for delay in filing of Form GSTR-4 waived off.
3. GST Compliance Calendar for June 2022
INCOME TAX – INTERNATIONAL TAXATION
Tax Residency Certificate – DTAA Benefits
The Punjab and Haryana High Court, has held that Tax Residency Certificate issued by a foreign country can be considered valid for the purpose of claiming benefit under the Indo – Mauritius DTAA. The Court reversed the AAR Ruling and relied upon CBDT Circular No. 789 to the effect that certificate of residence issued by the Mauritius Authorities constitute sufficient evidence for residential status.
We are pleased to share our June 2022 edition of the GST Bulletin covering recent amendments/ updates in the realm of GST.
This issue covers in detail the following:
1. Judicial Updates
• No GST on services by security manager located outside India for subscription to secured notes placed in USA.
• Concessional GST rate of 0.75% on construction applies to promoter and not to sub-contractor.
• Ocean freight levy violates 'Composite supply' principle under GST.
• Secondment of employees by Overseas Group Company is covered under Manpower Supply & liable to service tax.
• Charitable clubs imparting sports training exempt, however entrance/membership fees taxable.
2. Notifications/ Circulars
• Due date for filing GSTR-3B for April 2022 extended.
• Due date for payment of tax in GST PMT-06 for April 2022 extended.
• Late fee for delay in filing of Form GSTR-4 waived off.
3. GST Compliance Calendar for June 2022
Your guide on the most crucial pillar of GST - Input Tax Credit.
We hope this guide can help you understand the contours of Input Tax credit with regard what you are eligible for and what is explicitly denied in the law.
Corporate Updates
SEBI
Recording of Non Disposal Undertaking (NDU)in the Depository System
Interest and Dividend information reporting in case of Custodial Accounts-Rule 114G(1)(e) of the Income Tax Rules, 1962
Non-compliance with certain provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
MCA
MCA comes out with further exemptions to Private Companies and notifies the amendment to the principal notification dated 5th June, 2015
MCA comes out with further exemptions to Government Companies and notifies the amendment to the principal notification dated 5th June, 2015
TAXATION
CBDT provides clarification on Reduced Liability of Tax on complex, building, flat etc. under GST
Company Website:
www.acquisory.com
TransPrice Times 16th - 31st March 2017Akshay KENKRE
Dear Members,
We are pleased to present TransPrice Times for the second fortnight of March 2017.
This periodical covers the important amendments made to Finance Bill 2017, which has now received the Presidential assent. In other recent updates, this issue covers the circular on Income Computation and Disclosure Standards (ICDS) released by CBDT, while the Tax Courts have delivered important rulings addressing key transfer pricing issues related to recharacterization of share application, depreciation adjustment.
We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in
Thank You and Happy Reading!!
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Your guide on the most crucial pillar of GST - Input Tax Credit.
We hope this guide can help you understand the contours of Input Tax credit with regard what you are eligible for and what is explicitly denied in the law.
Corporate Updates
SEBI
Recording of Non Disposal Undertaking (NDU)in the Depository System
Interest and Dividend information reporting in case of Custodial Accounts-Rule 114G(1)(e) of the Income Tax Rules, 1962
Non-compliance with certain provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
MCA
MCA comes out with further exemptions to Private Companies and notifies the amendment to the principal notification dated 5th June, 2015
MCA comes out with further exemptions to Government Companies and notifies the amendment to the principal notification dated 5th June, 2015
TAXATION
CBDT provides clarification on Reduced Liability of Tax on complex, building, flat etc. under GST
Company Website:
www.acquisory.com
TransPrice Times 16th - 31st March 2017Akshay KENKRE
Dear Members,
We are pleased to present TransPrice Times for the second fortnight of March 2017.
This periodical covers the important amendments made to Finance Bill 2017, which has now received the Presidential assent. In other recent updates, this issue covers the circular on Income Computation and Disclosure Standards (ICDS) released by CBDT, while the Tax Courts have delivered important rulings addressing key transfer pricing issues related to recharacterization of share application, depreciation adjustment.
We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in
Thank You and Happy Reading!!
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
Biological screening of herbal drugs: Introduction and Need for
Phyto-Pharmacological Screening, New Strategies for evaluating
Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
for Anti-inflammatory, Antiulcer, Anticancer, Wound healing, Antidiabetic, Hepatoprotective, Cardio protective, Diuretics and
Antifertility, Toxicity studies as per OECD guidelines
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
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1. Analysis of the recent ruling of CESTAT, New Delhi in M/s
Power Finance Corporation Ltd. v. Commissioner (Appeal),
Central Excise and Service Tax, LTU, New Delhi and
Implications of the same on GST.
Service Tax Appeal No. 50753 of 2017
Order No. – Final Order No. 50502/2022
Bench:
Rachna Gupta (Judicial Member)
P.V. Subba Rao (Technical Member)
2. Facts of the case:
- The Appellant - a Non-Banking Financial Company - financing projects.
- Pays service tax on banking and other financial services that it provides.
- Appellant took Cenvat Credit on service tax - paid on services relating to CSR for period 01.04.2011
to 31.12.2015.
- Show-cause notice issued on 12.04.2016 to the Appellant - denying cenvat credit.
- Ground for SCN being - CSR expenses do not constitute input service for output service - ‘banking
and other financial services’.
- Order-in-original (impugned order) passed by the Commissioner of Central Excise and Service Tax,
LTU, Delhi on 01.12.2016,
- Denied credit on service tax of Rs. 78,68,936 taken by the Appellant in the relevant period.
3. Submissions made in the Appeal:
1. Expenditure on CSR - discharge of statutory liability u/s 135 of the Companies Act, 2013.
2. Services availed in respect of CSR activities - constitutes input service under Rule 2(I) of CENVAT
Credit Rules 2004.
3. Appellant relies on the cases of Essel Propack Ltd. and Millipore India Pvt. to further their stance.
4. Appellant - taken Cenvat Credit under bonafide belief of being entitled to it - therefore, extended
period of limitation must not be invoked.
5. Penalty u/s 76 of the Finance Act, 1994 - concerns default in payment of service tax - the present
dispute is in respect of Cenvat Credit. Thus, Penalty - not imposable.
4. Submissions, on behalf of the Revenue:
1. Revenue - supports impugned order - submits that to check if service qualifies as an ‘input service’,
definition of input service under Rule 2(I) of Cenvat Credit Rules, 2004 to be referred.
2. Relevant portion of the definition reads as: “Any service used by a provider of taxable service for
providing an output service”.
3. In case of service providers, only thing required to be checked - whether there is a nexus between
output services and the services on which credit is claimed.
4. CSR - even though, an obligation under Companies Act - no nexus to the services provided.
5. Issues involved:
1. Whether expenditure incurred by the Appellant in discharging CSR can be construed as Input Service for
the output services rendered by it?
2. Whether extended period of limitation can be invoked in the present case?
3. Whether penalty is imposable under section 76 of Finance Act, 1994.
6. Decision of the Hon’ble CESTAT, New Delhi:
1. CSR - LEGAL OBLIGATION AND NOT INPUT SERVICE FOR OUPUT SERVICE - ”BANKING
AND OTHER FINANCIAL SERVICES”
2. LANGUAGE OF RULE 2(I) CCR, 2004 – ABSENCE OF LEGISLATIVE INTENT
The definition reads as: “for providing output services”. Expenses towards CSR are not used for
providing output services, thus, they are not to be construed as input services, for providing ‘banking
and other financial services’.
3. CSR- NOT MENTIONED EVEN IN THE INCLUSION CLAUSE OF DEFINITION
4. DEMAND FOR PENALTY: NO EVIDENCE OF FRAUD OR COLLUSION
7. .
Coming to the examination of case laws, cited by the Appellant, Hon’ble CESTAT
observed as following:
1. In respect of Millipore India Pvt. Ltd case, the Hon’ble Karnataka High Court
had made just a passing reference to CSR in para 7 but that did not form an
issue in dispute, nor any decision was taken on whether CSR qualifies as an
input service.
2. In respect of Essel Propack Ltd. case, the order of CESTAT Mumbai does not
lay down correct law as Rule 2(I) does not include ‘activities relating to
business’ as input service. And, it is not in the hands of tribunal to modify or
enlarge scope of this Rule with the same being a legislative or quasi-
legislative function.
8. Summary of the ruling of Hon’ble CESTAT:
● CSR obligation is consequent to the rendering of output services.
● Only such services which are used for providing output service qualify as input service. There could be
services which are used not for providing output service but for some other business purpose.
● Some services which may not be used for providing output service have been mentioned in the inclusion
part of the definition of input service. However, CSR was not mentioned therein.
● Mumbai Tribunal ruling in case of Essel Propack Ltd., which allowed CENVAT credit on CSR activities,
does not lay down the correct law.
● Tribunal held that the taxpayer was not entitled to CENVAT credit on services used for undertaking CSR
activities. However, demand for extended period of limitation was set aside.
9. Input Tax Credit on GST paid towards CSR Expenses:
Provisions under the CGST Act, 2017:
● While the earlier legislations imposed numerous restrictions on credits, such conditions are now a lot
relaxed with Section 17(5) of the CGST Act mentioning a list of supplies for which credit is not
available.
● According to Section 16(1) of the CGST Act, every registered person is entitled to take input tax
credit on supplies of goods or services or both used in the course or furtherance of business. This is
unlike the erstwhile Cenvat credit regime credit was available only if the goods/ services were
covered by the definition of inputs, input services or capital goods.
● Therefore, based on the above-mentioned provisions it can be said that input tax credit is available
for any inward supply which is used in the course or furtherance of business, unless it is covered by
the negative list mentioned under Section 17(5) of the CGST Act
10. Contrary Rulings over the subject:
● In the case of Polycab Wires Pvt Ltd reported at 2019-VIL-100-AAR, the applicant had distributed electrical goods to people
affected by flood in Kerala against discharge of its CSR obligations. The Kerala AAR held that the applicant distributed
electrical items on free basis without collecting any money and for these transactions input tax credit would not be
available as per Section17(5)(h) of the KSGST Act and CGST Act. Therefore, it can be seen that the provisions of Section
17(5)(h) of the CGST Act are invoked to deny ITC of goods distributed free of cost for meeting CSR obligations.
Section 17(5)(h) of the CGST Act - according to this sub-section, ITC is not available for “goods lost, stolen, destroyed,
written off or disposed of by way of gift or free samples”. It is to be seen that the said sub-section merely places ITC
restriction on free distribution of goods and does not restrict ITC on provision of services for free.
● In the case of CIT v. Ajax products Ltd reported at (1965) 55 ITR 741, the Supreme Court had held that there was no scope
for intendment where the words used by the legislature were clear and unambiguous. Therefore, the restriction under
Section 17(5)(h) cannot be made applicable on free provision of services.
11. .
● Uttar Pradesh Authority for Advance Ruling (‘AAR’) in the matter of Dwarikesh Sugar Industries
Ltd (2021) held that a company is mandatorily required to undertake CSR activities and the same
thus, forms a core part of its business process. Hence, the CSR activities are to be treated as
incurred in “the course of business”.
● Thus, Uttar Pradesh AAR held that the expenses incurred by the Company in order to comply with
requirements of CSR under the Act qualify as being incurred in the course of business and are
eligible for ITC in terms of the Section 16 of the CGST Act, 2017.
● Gujarat Authority for Advance Ruling (‘AAR’) in the matter of Adama India Pvt. Ltd (2021) held that
“CSR activities, as per Companies (CSR Policy) Rules, 2014 are those activities excluded from
normal course of business of the applicant and therefore not eligible for ITC, as per section 16(1) of
the CGST Act.”
12. Presenter’s comments on whether ITC can be availed
on GST paid towards CSR Expenses, incurred in the
course or furtherance of business?
● It is relevant to note that the scope of input service under GST is wider and covers all services used in
the course or furtherance of business (unless the service comes under ‘blocked credit’).
● However, in case of service tax, as already explained earlier in the presentation, in order to claim
CENVAT credit, an input service must have a nexus with the output service. Then only can the credit
be availed. So, there exists a clear difference in scope, when the two definitions are viewed.
● In my opinion, therefore, the ruling in M/s Power Finance Corporation should not be considered to be
applicable when it comes to availing credit on GST paid towards CSR Expenses, in the course of
business.
13. .
● However, a clarification is still required because the CESTAT in Power Finance Corporation Ltd. also held
that CSR is consequent to the rendering of output services. If that logic is applied to GST, question of
availing ITC should not even arise, because CSR expenses will not satisfy the definition under CGST Act
which includes goods or services used or intended to be used in the course or furtherance of his business.
● AAR of Uttar Pradesh, on the other hand, in the context of GST, has held that a company is mandatorily
required to undertake CSR activities and the same forms a core part of its business process. CSR activities,
therefore, are to be treated as incurred in “the course of business”. The expenses, thus, incurred by the
Company in order to comply with requirements of CSR under the Act qualify as being incurred in the course
of business and are eligible for ITC in terms of the Section 16 of the CGST Act, 2017.
● I think that there is a need for another ruling, either from a larger bench of CESTAT or from a High Court or
the Supreme Court, overturning what has been laid down in M/s Power Finance Corporation case. The 2
member bench, instead of clearing the ambiguities, has contributed to further confusion when it comes to
the status of CSR activities, being part of a business.
14. .
● In my view, considering the mandatory requirement of CSR under Companies Act, 2013 and other
direct & indirect advantages which the Corporate derives by discharging CSR, such activities should
well be considered a part of business, because of their assistance in smooth running of a business.
● MOREOVER, as already pointed out, while discussing Polycab Wires Pvt Ltd case, there exist
doubts over the rationale in respect of the distinction created when it is about availability of ITC on
free distribution of goods (and services) under section 17(5) of the CGST Act. It is high time that the
government brings in amendment to ensure that ITC is allowed for distribution of goods and
services alike for CSR. This will encourage the industry to come forward for taking up similar
projects of CSR which otherwise requires government support.
Cenvat Credit- Service providers, who collect and remit tax from their customers are also service receivers who pay tax to other service providers themselves. For instance, a software development company which collects and remits service tax on its billing also pays service tax on services availed by the company like telephone charges, security charges, consultation charges and more. If a mechanism for CENVAT credit is not available, then the tax on tax has a cascading effect – ultimately increasing the final charge of the service too high. To avoid this effect, the Government allows service providers to take credit of tax paid for the services availed in providing output service.
Corporate social responsibility, or CSR, activities reflect a business’s accountability and commitment to contributing to the well-being of communities and society through various environmental and social measures. CSR activities may include environmental initiatives, charity work, ethical labour practices and volunteer projects.
135 (5)- The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, 5[or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years] in pursuance of its Corporate Social Responsibility Policy:
(Section 135 of the Act, mandates companies to spend 2% of their average net profits towards CSR expenses. If not complied with, action is taken extending to fine and imprisonment)
In terms of section 73 of Finance Act, 1994, the demand of service tax can be raised within five years by invoking the extended period of limitation.(otherwise, it’s one year) (Maharaja Crane Services Vs Commissioner of CGST (CESTAT Chandigarh)
ALSO, even when as assessee has suppressed facts, the extended period of limitation can be invoked only when ”suppression” or “collusion” is wilful with an intent to evade payment of duty- CESTAT Delhi in SOTC Travels Services v. Principal Commr. Of CE.
SECTION 76 Finance Act- Penalty for Failure to pay service tax – Chapter V of Finance Act, 1994
Rule 2(l) CCR- "input service" means any service,
used by a provider of taxable service for providing an output service; or
used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
Rule 2 (l) "input service" means any service,
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
Section- 76
With regards to the penalty levied in the event of failure of service tax payment or deference of service tax payment, Section 76 has been amended to determine whether the failure or deference was done with no unscrupulous intention to avoid the payment of service tax. The main aim of the amendment of penal provisions under Section 76 of the Finance Act, was to take into consideration penalties levied on those assessees who have failed to make service tax payments for reasons that are deemed to be without any intent of malice. This means that the penalties levied will not be in accordance with penalties levied on those assessees who actively avoid service tax payments due to unscrupulous activities such as fraud, concealment of information, violation of the provisions and rules of the Act etc.
SECTION 76 Finance Act- Penalty for Failure to pay service tax – Chapter V of Finance Act, 1994
In terms of section 73 of Finance Act, 1994, the demand of service tax can be raised within five years by invoking the extended period of limitation.(otherwise, it’s one year) (Maharaja Crane Services Vs Commissioner of CGST (CESTAT Chandigarh)
ALSO, even when as assessee has suppressed facts, the extended period of limitation can be invoked only when ”suppression” or “collusion” is wilful with an intent to evade payment of duty- CESTAT Delhi in SOTC Travels Services v. Principal Commr. Of CE.
CCR, 2004- Rule 2 (l) "input service" means any service,
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
SECTION 76. Penalty for failure to pay service tax.— (1) Where service tax has not been levied or paid, or has been short-levied or short-paid, or erroneously refunded, for any reason, other than the reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice under sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty not exceeding ten per cent. of the amount of such service tax :
Provided that where service tax and interest is paid within a period of thirty days of —(i) the date of service of notice under sub-section (1) of section 73, no penalty shall be payable
and proceedings in respect of such service tax and interest shall be deemed to be concluded;
(ii) the date of receipt of the order of the Central Excise Officer determining the amount of service tax under sub-section (2) of section 73, the penalty payable shall be twenty-five per cent. of the penalty imposed in that order, only if such reduced penalty is also paid within such period.
(2) Where the amount of penalty is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, over the above the amount as determined under sub- section (2) of section 73, the time within which the reduced penalty is payable under clause (ii) of the proviso to sub-section (1) in relation to such increased amount of penalty shall be counted from the date of the order of the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be.
CSR- LEGAL OBLIGATION AND NOT INPUT SERVICE
Hon’ble CESTAT observed that output Services rendered by the Appellant were “banking and other financial services” and after rendering these services, since the Appellant earns profit or meets criteria under Section 135 of the Companies Act, 2013, it results in a legal obligation on them to spend on activities of CSR. Input Services are those which are used for providing output services. CSR arises only after output services are provided and the Appellant earns some profit.
LANGUAGE OF RULE 2(I) CCR, 2004
Reading Rule 2(I) of CCR, 2004 shows that not any service used by the provider of output services in running its business qualifies as ‘input service’ but only the ones which are used for providing output services are termed as ‘input services’. Had legislative intent been to allow an output service provider to avail Cenvat Credit on all the services they use during business, then, then rule would have read as ‘any service used by the provider of output service’. However, the definition reads as: “for providing output services”. Expenses towards CSR are not used for providing output services, thus, they are not to be construed as input services, for providing ‘banking and other financial services’.
CSR- NOT MENTIONED EVEN IN THE INCLUSION CLAUSE
FURTHER, Hon’ble CESTAT observed the definition of input services is followed by an inclusion clause and an exclusion clause. Inclusion part of the definition includes some of those services which may not be used for providing output service but are still to be construed as input services.
These include the services used for modernisation, renovation, repairs of factory premises, advertisement etc. (Legislative intent to include them, even though, they do not have a nexus with output services.
CSR is not included in the inclusion clause.
DEMAND FOR PENALTY:
On the question of extended period of limitation and imposition of penalties, there is no evidence of fraud or collusion or wilful statement or suppression of the facts in the present matter. Therefore, the demand can be raised only within the normal period of limitation.
The denial of Cenvat Credit on expenses incurred on CSR within normal period of limitation is upheld and the demand for extended period of limitation and penalty is set aside.
- MILLIPORE- “That apart, the definition of input services is too broad. It is an inclusive definition. What is contained in the definition is only illustrative in nature. Activities relating to business and any services rendered in connection there- with, would form part of the input services. The medical benefit extended to the employees, insurance policy to cover the risk al accidents to the vehicle as well as the person, certainly would be a part of the salary paid to the employees. Landscaping of factory or garden certainly would fall within the concept of modernization, renovation, repair, etc., of the office premises. A any rate, the credit rating of an industry is depended upon how the factory is maintained inside and outside the premises The Environmental law expects the employer to keep the factory without contravening any of those laws. That apart, now the concept of corporate social responsibility is also relevant. It is to discharge a statutory obligation, when the employer spends money to maintain their factory premises in an eco- friendly, manner, certainly, the tax paid on such services would form part of the costs of the final products. In those circumstances, the Tribunal was right in holding that the service tax paid in all these cases would fall within the input services and the assessee is entitled to the benefit thereof.”
ESSEL- To pin point the dispute, it is now to be looked into as to if CSR can be considered as input service and be included within the definition of "activities relating to business" and if in so doing, a company's image before corporate world is enhanced so as to increase its credit rating as found from the handbook of CSR activities discussed above. The answer is in the affirmative since to win the confidence of the stakeholders and shareholders including the people affected by the supply of raw material from their locality, say natural resources like mines and minerals etc., the hazardous emission that may result in production activities.”
ESSEL IN BRIEF- Corporate Social Responsibility (CSR) can be considered as Input service and be included within definition of 'activities relating to business' for availing CenvatCredit
Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can use to reduce its tax liability when it makes a sale. In other words, businesses can reduce their tax liability by claiming credit to the extent of GST paid on purchases. Goods and Services Tax (GST) is an integrated tax system where every purchase by a business should be matched with a sale by another business. This makes flow of credit across an entire supply chain a seamless process.
16 (1) Eligibility and conditions for taking input tax credit.— (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
Business is defined under CGST Act, 2017 as (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); the phrase “in course or furtherance of business” has not been defined in the law.
Dictionary meaning of the term “furtherance” implies advancement, promotion of scheme, etc. Therefore, furtherance of business would imply advancement or promotion of business. Any activity carried on with a purpose to achieve business objectives, business continuity and stability would per se amount to an activity in course or furtherance of business.
BLOCKED CREDIT: 17 (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following, namely:—
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free
samples; and
BLOCKED CREDIT: 17 (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following, namely:—
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free
samples; and
Section 135(7) is a penal provision under the Act which deals with penalty on non-compliance of section 135(5) and (6). It was observed by the UP AAR that a Company fulfilling eligibility criteria under section 135(1) of the Act is required to mandatorily spend towards CSR and thus, must comply with these provisions to ensure smooth run of business.
As per Companies (CSR Policy) Rules, 2014, (d) "Corporate Social Responsibility (CSR)" means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:-
(i) activities undertaken in pursuance of normal course of business of the company:
Section 135(7) is a penal provision under the Act which deals with penalty on non-compliance of section 135(5) and (6). It was observed by the UP AAR that a Company fulfilling eligibility criteria under section 135(1) of the Act is required to mandatorily spend towards CSR and thus, must comply with these provisions to ensure smooth run of business.