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Tax Amicus: December 2013

Service Tax on services provided to educational institutions and recent exemption to canteen service provided in factories, are the topics discussed in two articles covered in this month’s Tax Amicus. According to the author of the first article, there still exists doubt as to whether in the light of the recent CBEC circular all services provided to educational institutions are exempted, or it would still be necessary for such services to first qualify as auxiliary educational services in order to qualify for the exemption. The second article poses a question as to whether exemption is available to outdoor caterers providing service to factories.

This issue covers developments like amendment to Central Excise Valuation Rules in respect of valuation when part of goods manufactured are either captively consumed or removed to related person and lowering of threshold limit for mandatory e-payment of Central Excise duty and Service Tax. Ratio decidendi summarises order of CESTAT, New Delhi holding that for the purpose of remission of duty, fire caused by short-circuit is “unavoidable accident”. Calcutta High Court has allowed rebate on goods exported after 6 months from date of removal. Price renegotiated and reduced after importation has been held to be transaction value and inspection charges paid to third party before import have been held to be includible in value of imported goods. Mumbai High Court has held that ‘Free’ is also a rate of duty. CBEC has clarified its Service tax Voluntary Compliance Encouragement Scheme (VCES) and has asked the department to assist the declarants in rectification of defects and the same is highlighted in this issue. Under VAT, Rajasthan High Court has held that optional service charges are not includible in sale price. The Income Tax section of this issue covers order of the ITAT, Mumbai wherein it has been held that payment to foreign commission agent providing technical inputs is taxable as Fee for Technical Services.

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