Category: Service Tax Notifications 2013

Air Conditioned or  central air heating Restaurant, eating joint or mess serving food or beverages are liable to pay service tax. Central Board of Excise & Customs has issued the clarification related to applicability of service tax on food served outside the Air Conditioned area which is clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided in the AC restaurant is liable to service tax and service provided in a non air-conditioned or non centrally air- heated restaurant will not be liable to service tax. In such cases, service provided in the non air-conditioned / non-centrally air-heated restaurant will be treated as exempted service and credit entitlement will be as per the Cenvat Credit Rules.  In a hotel, if services are provided by a AC restaurant in other areas e.g. swimming pool or an open area attached to the restaurant are liable to service tax.

Circular No.173/8/2013 – ST

F.No.334/3/2013-TRU

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

Tax Research Unit

                                                                                                               North Block

New Delhi, 7^th October, 2013

To

Chief Commissioners of Central Excise and Customs (All),

Director General (Service Tax), Director General (Central Excise Intelligence), Director General (Audit),

Commissioners of Service Tax (All)

Commissioners of Central Excise (All),

Commissioners of Central Excise and Customs (All).

Madam/Sir,

 Subject: Restaurant Service- clarification -regarding

As part of the Budget exercise 2013, the exemption for services provided by specified restaurants extended vide serial number 19 of Notification 25/2012-ST was modified vide para 1 (iii) of Notification 3/2013-ST.  This has become operational on the 1^st of April, 2013.

2.    In this context, representations have been received. On the doubts and questions raised therein clarifications are as follows:

 3.    Trade Notice/Public Notice may be issued to the field formations and taxpayers. Please acknowledge receipt of this Circular. Hindi version follows.

Services provided to an educational institution in respect of education exempted from service tax, by way of,-

(a) auxiliary educational services; or

(b) renting of immovable property;”.

 As defined in the said notification, “auxiliary educational services” means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge–enhancement activity, whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution.

By virtue of the entry in the negative list and by virtue of the portion of the exemption notification, it will be clear that all services relating to education are exempt from service tax. There are many services provided to an educational institution. These have been described as “auxiliary educational services” and they have been defined in the exemption notification. Such services provided to an educational institution are exempt from service tax. For example, if a school hires a bus from a transport operator in order to ferry students to and from school, the transport services provided by the transport operator to the school are exempt by virtue of the exemption notification.

In addition to the services mentioned in the definition of “auxiliary educational services”, other examples would be hostels, housekeeping, security services, canteen, etc.

Circular No.172/7/2013 – ST

 F. No.B1/14/2013-TRU

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise& Customs

Tax Research Unit

146-F, North Block

New Delhi, 19^th September, 2013

To

Chief Commissioners of Central Excise and Service Tax (All),

Director General (Service Tax), Director General (Central Excise Intelligence),

Director General (Audit),

Commissioners of Service Tax (All),

Commissioners of Central Excise and Service Tax (All).

 Madam/Sir,

 Subject: Education services – clarification — reg.

 The following representations have been received seeking clarifications regarding the levy of service tax on certain services relating to the education sector:

 Private Schools Correspondents Confederation, Madurai.

1. Tamil Nadu Nursery, Primary, matriculation and Higher Secondary Schools Association, Chennai.
2. Punjab Association, Chennai.
3. Association of Self financing Universities of Rajasthan
4. Unaided Schools’ Forum, Mumbai.
5. Vedavalli Vidyalaya, Wallajapet.
6. Independent Schools Associations, Chandigarh.
7. Mother Teresa Public School, New Delhi.
8. BVM Global, Chennai.
9. Sastra University, Tanjavur.
10. HLC International, Chennai.
11. Sodexo Food Solutions, Mumbai.
12. Federation of Associations of Maharastra, Mumbai.

2.         The matter is covered by two provisions of the Finance Act, 1994. Section 66D of the Finance Act contains a negative list of services and clause (l) thereof reads as under:

“services by way of –

(i) pre-school education and education upto higher secondary school or equivalent;

(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;

(iii) education as a part of an approved vocational education course;”.

 Further section 93(1) of the Finance Act, 1994, enables the Government to exempt generally or subject to such conditions taxable service of specified description. By virtue of the said power, Government has issued a notification No.25/2012-ST dated 20^th June,2012, exempting certain services. Sl.no.9 thereof reads as follows:

 “Services provided to an educational institution in respect of education exempted from service tax, by way of,-

(a) auxiliary educational services; or

(b) renting of immovable property;”.

 As defined in the said notification, “auxiliary educational services” means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge–enhancement activity, whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution.

 3.         By virtue of the entry in the negative list and by virtue of the portion of the exemption notification, it will be clear that all services relating to education are exempt from service tax. There are many services provided to an educational institution. These have been described as “auxiliary educational services” and they have been defined in the exemption notification. Such services provided to an educational institution are exempt from service tax. For example, if a school hires a bus from a transport operator in order to ferry students to and from school, the transport services provided by the transport operator to the school are exempt by virtue of the exemption notification.

 4.         In addition to the services mentioned in the definition of “auxiliary educational services”, other examples would be hostels, housekeeping, security services, canteen, etc.

 5.         Thus the apprehensions conveyed in the representations submitted by certain educational institutions and organizations have no basis whatsoever. These institutions and organizations are requested not to give credence to rumours or mischievous suggestions. If there is any doubt they are requested to approach the Chief Commissioner concerned.

 6.         All concerned are requested to acknowledge the receipt of this circular

An officer of Central Excise not below the rank of  Superintendent of Central Excise can carry out an arrest on being authorized by the Commissioner of Central Excise. To authorize the arrest the Commissioner should have reason to believe that the person proposed to be arrested has committed an offence specified in clause (i) or clause (ii) of sub-section (1) of section 89. The reason to believe must be based on credible material which will stand judicial scrutiny. Also Circular 171/6/2013-Service Tax deals with the procedure of arrest also arrest pre and post conditions.

Section 89 of the Finance Act, 1994. Offences and Penalties. – (1) Whoever commits any of the following offences, namely,—”(a) knowingly evades the payment of service tax under this Chapter; or”;

 (b) avails and utilises credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or

(c) maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or

(d) collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, shall be punishable,—
(i) in the case of an offence where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to three years:
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;
(ii) in any other case, with imprisonment for a term, which may extend to one year.

(2) If any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to three years:

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term less than six months.
(3) For the purposes of sub-sections (1) and (2), the following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than six months, namely:—
(i) the fact that the accused has been convicted for the first time for an offence under this Chapter;
(ii) the fact that in any proceeding under this Act, other than prosecution, the accused has been ordered to pay a penalty or any other action has been taken against him for the same act which constitutes the offence;
(iii) the fact that the accused was not the principal offender and was acting merely as a secondary party in the commission of offence;
(iv) the age of the accused.

(4) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Chief Commissioner of Central Excise.

Circular 171/6/2013-Service Tax

F.No. 137/47/2013-Service Tax

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

Service Tax Wing

***

New Delhi, the 17th September, 2013

To,

All Chief Commissioners of Central Excise

All Chief Commissioners of Customs and Central Excise

All Directors General

All Commissioners of Service Tax

All Commissioners of Central Excise

 Subject:  Guidelines for arrest and bail in relation to offences punishable under the Finance Act, 1994

 Section 103 (K) of the Finance Act, 2013 has introduced Sections 90 & 91 in the Finance Act, 1994, with effect from  10^th May, 2013.  In terms of section 90 of the Finance Act , 1994, as amended, offences under section 89(1) (ii) shall be cognizable and all other offences shall be non-cognizable and bailable. In terms of section 91(1) read with section 89(1) (i) and (ii) of the Finance Act, 1994, as amended, the power to arrest has been introduced in cases involving evasion of service tax covered under section 89(1) (i) and (ii) of the Finance Act, 1994, as amended and the amount of service tax evaded  exceeds rupees fifty lakh. In this context, the following points may be noted for strict compliance:-

 1.2       The following cases are covered under section 89(1) (i):

1.2.1     where a person knowingly evades the payment of service tax, or

1.2.2   avails and utilizes  credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules, or

1.2.3    maintains false books of accounts or fails to supply any information which he is required to supply or supplies false information, and the amount of service tax involved is more than fifty lakh rupees.

In such cases, the Assistant Commissioner or  the Deputy Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise,  have the same powers and be subject to the same provisions as an officer in-charge of a police station has, and  is subject to, under Section 436 of the Code of Criminal Procedure, 1973( 2 of 1974). This is in terms of section 91(3) of the Finance Act, 1994, as amended.

 1.3       The following cases are covered under section 89(1) (ii):

1.3.1    where  a person has collected any amount exceeding fifty lakh rupees as service tax but fails to pay the amount as collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due.

In such cases,   after following the due procedure of arrest, the arrested person must be produced before the magistrate without unnecessary delay, and definitely within 24 hours. This is in terms of section 91(2) of the Finance Act, 1994, as amended. The magistrate will decide on whether or not to grant bail.

 2.0        Conditions precedent

 2.1        Since arrest impinges on the personal liberty of an individual, this power must be exercised carefully.  The Finance Act 1994, as amended,  has  specified categories of offences in respect of which only powers of arrest may be exercised and these offences are covered under clause (i) or clause (ii) of sub-section (1) of section 89 of the Finance Act, 1994.  Further, the Finance Act 1994 has also prescribed value limits of evasion of service tax exceeding  Rs 50 lakh, for exercising the powers of arrest.

 2.2        The legal stipulations in the Finance Act 1994 , as amended, contained in section 91 read with section 89 must be strictly adhered to. An officer of Central Excise not below the rank of  Superintendentof Central Excise can carry out an arrest on being authorized by the Commissioner of Central Excise. To authorize the arrest the Commissioner should have reason to believe that the person proposed to be arrested has committed an offence specified in clause (i) or clause (ii) of sub-section (1) of section 89. The reason to believe must be based on credible material which will stand judicial scrutiny.

 2.3     Apart from fulfilling the legal requirements, the need to ensure proper investigation, prevention of the possibility of tampering with evidence or intimidating or influencing witnesses and large amounts of service tax evaded are relevant factors before deciding to arrest a person.

  3.0      Procedure for arrest

 3.1        The provisions of   the Code of Criminal Procedure 1973 (2 of 1974) relating to arrest and the procedure thereof must be adhered to .  It is therefore advised that the Commissioner should ensure that allofficers  are fully familiar with the provisions of the  Code of Criminal Procedure 1973 (2 of 1974).

 3.2        There is no prescribed format for arrest memo but an arrest memo must be in compliance with the directions in D.K Basu vs State of West Bengal reported in 1997(1) SCC 416 ( see paragraph 35). The arrest memo should include:

3.2.1     brief facts of the case;

3.2.2     details of the person arrested;

3.2.3     gist of evidence against the person;

3.2.4    relevant section (s) of the Finance Act, 1994 or other laws attracted to the case and to the arrested person;

3.2.5    the grounds of arrest must be explained to the arrested person and this fact noted in the arrest memo;

3.2.6   a nominated person (as per the details provided by arrested person) of the arrested person should be informed immediately and this fact also may  be mentioned in the arrest memo;

3.2.7   the date and time of arrest may be mentioned in the arrest memo and the arrest memo should be given to the person arrested under proper acknowledgment;

3.2.8    a separate arrest memo has to be made and provided to each individual/arrested person. This should particularly be kept in mind in the event that there are several arrests in a single case.

 3.3        Further there are certain modalities that should be complied with at the time of arrest and pursuant to an arrest, which include the following:

3.3.1    A female  should be arrested by or in the presence of a woman  officer;

3.3.2   Medical examination of an arrested person should be conducted by a medical officer in the service of Central or State Governments and in case the  medical officer is not available , by a registered medical practitioner, soon after the arrest is made. If an arrested person is a female then such an examination shall be made only  by, or under supervision of a female medical officer , and in case the female medical officer is not available, by  a female registered medical practitioner.

 3.3.3   It shall be the duty of the person having the custody of an arrested person to take reasonable care of the health and safety of the arrested person.

  4.0   Post arrest formalities

 4.1        The procedure is separately outlined for the different categories as listed in section 89(1) (i) and (ii) of the Finance Act, 1994, as amended:

 4.1.1     In cases covered under section 89(1) (i), the Assistant Commissioner or Deputy Commissioner is bound to release a person on bail against a bail bond. The bail conditions should be informed   in writing to the arrested person and also informed on telephone to the nominated person of the person (s) arrested .The arrested person should be also allowed to talk to a nominated person. The conditions will relate to, inter alia, execution of a personal bail bond and one surety of like amount given by a local person of repute, appearance before the investigating officer when required and not leaving the country without informing the officer. The amount to be indicated in the personal bail bond and security will depend, inter alia, on the amount of tax involved.

4.1.2       If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail forthwith.   However, only in cases where the conditions for granting bail are not fulfilled, the arrested person shall be produced before the appropriate Magistrate without unnecessary delay and within twenty-four (24) hours of arrest.  The arrested person may be handed over to the nearest police station for his safe custody, within 24 hours, during the night under a challan, before he is produced before the Court.

 4.2         In cases covered under section 89(1) (ii) and only in the event of circumstances preventing the production of the arrested person before a Magistrate without unnecessary delay, the arrested person may be handed over to nearest Police Station for his safe custody, within 24 hours, under a proper challan, and produced before the Magistrate on the next day, and the nominated person of the arrested person may be also informed accordingly.

 4.3     Formats of the relevant documentation i.e. the Bail Offer Letter, the Bail Bond and the Challan for handing over to the police, in the Code of Criminal Procedure, 1973. ( 2 of 1974) may be followed.

 4.4       Every Commissionerate should maintain a Bail Register which will have the details of the case, arrested person, bail amount, surety amount. The money/instruments/documents received as surety should be kept in safe custody. The money should be deposited in the treasury. The other instruments/documents should be kept in the custody of a single nominated officer. It should be ensured that the instruments/documents received as surety are kept valid till the bail is discharged.

 5.0     Reporting System

 5.1     A report on every person arrested should be sent to the jurisdictional Chief Commissioner with a copy to DGCEI (Headquarters) the same day or on the next day.

 5.2         Chief Commissioners shall send a report on every arrest to the Zonal Member within 24 hours of the arrest giving such details as prescribed in the monthly report . To maintain an all India record of arrests made in service tax, a monthly report of all persons arrested in the Zone shall be sent by the Chief Commissioner to DGCEI (Headquarters), New Delhi, by the 5^th of the succeeding month,  in the following format:

Monthly Report on Persons Arrested in a Zone

 

Yours faithfully

(Rajeev Yadav)

Director (Service Tax)