Based on the comments received on the Exposure Draft on taxonomy, the Ministry of Corporate Affairs (MCA) has finalised the Taxonomy and Business Rules for Commercial and Industrial (C&I) entities for filing their Balance Sheet and Profit and Loss Account in XBRL.
29 May 2011
CBDT on Black Money
Ministry of Finance28-May, 2011 14:34 IST
| Committee constituted under chairman, CBDT to examine ways to strengthen laws to curb the generation of black money in the country, its illegal transfer abroad and its recovery. |
| The Government has constituted a Committee under the Chairmanship of Chairman, Central Board of Direct Taxes (CBDT) to examine ways to strengthen laws to curb the generation of black money in the country, its illegal transfer abroad and its recovery. The Committee includes Member (L&C), CBDT, Director, Enforcement Directorate(ED), Director General, Directorate of Revenue Intelligence (DRI),Director General(Currency), Joint Secretary(FT&TR),CBDT, Joint Secretary,MoL, Director, FIU- IND, all as its Members. The Commissioner of Income Tax (CIT)(Inv),CBDT would be its Member Secretary. The Committee will examine the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia, (a) Declaring wealth generated illegally as national asset; (b) Enacting/amending laws to confiscate and recover such assets; and (c) Providing for exemplary punishment against its perpetrators. The Committee will also consult all the stakeholders and submit its report within a period of six months. DSM/SS (Release ID :72377) |
26 May 2011
CBDT Policy on Dept. Appeal to HC
IT : CBDT's instructions regarding Standard Operating Procedure on filing of appeals to High Court - INSTRUCTION NO. 7/2011 [F.NO. 279/MISC./M-42/2011-ITJ], DATED 24-05-2011 - see attachment
25 May 2011
Appointment of LLP as Statutory Auditors now permissible -LLP will not be treated as Body Corporate for Limited Purpose
Appointment of LLP as Statutory Auditors now permissible -LLP will not be treated as Body Corporate for Limited Purpose
The Ministry of Corporate Affairs has paved the way for the appointment of LLP, as the Statutory Auditor of the Company.
MCA vide its notification, has notified that LLP, which is a Body Corporate as per the Limited Liability Partnership Act 2008, shall not be treated as Body Corporate, for the purpose of section 226(3)(a) of the Companies Act 1956, in exercise of its powers under 2(7)(c) of the Companies Act 1956.
As section 2(7)(c) of the Companies Act 1956, the Central Government may by notification, notify that a Body Corporate, will not be recognized as Body Corporate for the purpose of the Companies Act 1956.
The text of section is given below:
(7) "body corporate" or "corporation" includes a company incorporated outside India but does not include—
(a) a corporation sole ;
(b) a co-operative society registered under any law relating to co-operative societies ; and
(c) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf ;
The Ministry of Corporate Affairs has paved the way for the appointment of LLP, as the Statutory Auditor of the Company.
MCA vide its notification, has notified that LLP, which is a Body Corporate as per the Limited Liability Partnership Act 2008, shall not be treated as Body Corporate, for the purpose of section 226(3)(a) of the Companies Act 1956, in exercise of its powers under 2(7)(c) of the Companies Act 1956.
As section 2(7)(c) of the Companies Act 1956, the Central Government may by notification, notify that a Body Corporate, will not be recognized as Body Corporate for the purpose of the Companies Act 1956.
The text of section is given below:
(7) "body corporate" or "corporation" includes a company incorporated outside India but does not include—
(a) a corporation sole ;
(b) a co-operative society registered under any law relating to co-operative societies ; and
(c) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf ;
Section 226 (3) of the Companies Act 1956 provides for the disqualification for appointment of auditor of a company and as per clause (a) of this sub section, a body corporate cannot be appointed as Auditor. The MCA by its aforesaid notification has taken LLP out of the purview of the Body Corporate under this sub section and therefore, LLP can be appointed as the Auditor of the company.
It is to be noted that MCA vide its circular no No 10/2011 dated 04/04/2011 has allowed CA/CS/CWA to practice under LLP in partnership wilh other fellow members of same institute and in case of CS, also with members of such recognized profession as may be prescribed.
Please take note that notification is yet to be published in the official gazette
Please click here to download the notification
22 May 2011
MCA's clarification regarding loan to Public Ltd. companies under section 295 of Companies Act, 1956
MCA's clarification regarding loan to Public Ltd. companies under section 295 of Companies Act, 1956
Section 295 of the Companies Act, 1956 - Directors, loans to - Clarification regarding loan to Public Limited Companies under section 295
GENERAL CIRCULAR NO. 24/2011, DATED 11-5-2011
It has come to the notice of the Ministry that some companies are making applications for getting prior approval of Central Government when they propose to make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to a Public Limited Company of which any such Director is a Director or a member even when the proposal does not fall under section 295(d) and section 295(e) of the Companies Act, 1956.
2. Companies are requested to note that when the beneficiary of the loan/guarantee/security is a Public Limited Company, approval of Central Government should only be sought if the provisions of sub-section (d) or (e) of section 295 of the Companies Act, 1956 are attracted. The application should also clearly bring out the facts in this regard.
20 May 2011
NEW DIRECTOR'S RELATIVE (OFFICE OR PLACE OF PROFIT) RULES, 2011
NEW DIRECTOR'S RELATIVE (OFFICE OR PLACE OF PROFIT) RULES, 2011
Director's Relative (Office or Place of Profit) Rules, 2011
NOTIFICATION NO. G.S.R. 357(E), DATED 2-5-2011
In exercise of the powers conferred by clause (b) of sub-section (1) of section 642, read with sub-section (1B) of section 314 of the Companies Act, 1956, the Central Government hereby makes the following Rules in supersession of the earlier Notification No. GS.R. 89(E), dated 5-2-2003, namely:—
1. (1) Short Title and Commencement: (1) These rules may be called Director's Relative (Office or Place of Profit) Rules, 2011.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Applicability : These rules shall apply to all companies registered under the Companies Act, 1956 except as provided in these rules.
3. Approval of the Central Government in case of Appointment of Relatives, etc. of Directors : No appointment for an office, or place of profit in a company shall take effect unless approved by the Central Government on an application, in respect of:—
(a) Partner of film or relative of a Director or Manager; or
(b) Firm in which such Director, or Manager of relative of either is a partner; or
(c) Private Company of which such Director or Manager or relative of either is a Director, or member, which carries a monthly remuneration exceeding, Rs. 2,50,000 p.m.
(d) An individual who is a relative of a Director, or Manager and is appointed as an Advisor or Consultant and paid remuneration including commission on periodical basis.
4. Selection of Relatives of Directors and Directors to Hold a Place of Office/Profit:—
(a) The selection and appointment of a relative of a Director for holding office or place of profit in the company with a salary exceeding Rs. 2,50,000 per month shall be approved by adopting the same procedure applicable to non-relatives and approved by a Selection Committee.
Explanation : For the purpose of the sub-rule, in the case of listed public companies, the expression "Selection Committee" means a committee, consisting at least three members, the majority of which shall be independent Directors and an outside Expert:
Provided that in case of unlisted companies, independent Directors are not necessary but outside experts should be there in the Selection Committee:
Provided further that in the case of private companies, Selection Committee is not necessary.
5. Procedure for Examination of Application : The application under rule 3 shall be examined with respect to the following, in addition to all other requirements under the Companies Act, 1956:—
(a) In the case of individual appointee, an undertaking from him that he/she will be in the exclusive employment of the company and will hold a place of profit in any other company.
(b) The monetary value of all allowances and perquisites and of total remuneration package (monthly/annually proposed to be paid to the appointee and details of the services that will be rendered by him to the company.
(c) Details of shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public holding, institutional holding (each institution separately) and the quantum of dividend paid by the company during the last three preceding financial years.
(d) Details of the educational qualification/experience, pay scale, allowances and other benefits of similarly placed executives.
(e) In case of the appointment of a relative, an undertaking from the Director/Company Secretary of the company that the similarly placed employees are getting the comparable salary.
(f) List and particulars of the employees who are in receipt of remuneration of Rs. 2,50,000 or more per month.
(g) The total number of relatives of all the Directors either appointed as Manager/Whole time Director, Manager or in any other position in the company, the total remuneration paid to all of them altogether as a percentage of profit as calculated for the purpose of section 198 of the Companies Act, 1956.
nn
19 May 2011
IndianCAs: NPA Norms Revised [1 Attachment]
[Attachment(s) from Ashwin Nagar included below]
RATES OF PROVISIONING FOR NPAS AND RESTRUCTURED ADVANCES REVISED
Enhancement of Rates of Provisioning for Non-Performing Assets and Restructured Advances
CIRCULAR NO. DBOD.NO.BP.BC. 94 /21.04.048/2011-12, DATED 18-5-2011
Please refer to paragraph 110 of the Monetary Policy Statement for the year 2011-12 (extract enclosed) wherein it was proposed to enhance the provisioning requirements on certain categories of non-performing advances and restructured advances. Accordingly, the revised provisioning requirements for the following categories of non-performing advances and restructured advances will be as under: (the current provisioning requirements are laid down in paragraph 5 of the Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Ref DBOD.No.BP.BC.21/21.04.048/2010-11, dated July 1, 2010).
Sub-Standard Advances :
1. Advances classified as "sub-standard" will attract a provision of 15 per cent as against the existing 10 per cent. The "unsecured exposures" classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the existing 20 per cent. However, "unsecured exposures" in respect of Infrastructure loan accounts classified as sub-standard, in case of which certain safeguards such as escrow accounts are available as indicated in our circular DBOD.No.BP.BC.96/08.12.014/2009-10, dated April 23, 2010, will attract an additional provision of 5 per cent only i.e. a total of 20 per cent as against the existing 15 per cent.
Doubtful Advances :
2. Doubtful Advances will continue to attract 100% provision to the extent the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. However, in respect of the secured portion, following provisioning requirements will be applicable:
i. The secured portion of advances which have remained in "doubtful" category up to one year will attract a provision of 25 per cent (as against the existing 20 per cent);
ii. The secured portion of advances which have remained in "doubtful" category for more than one year but upto 3 years will attract a provision of 40 per cent (as against the existing 30 per cent); and
iii. The secured portion of advances which have remained in "doubtful" category for more than 3 years will continue to attract a provision of 100%.
Restructured Advances:
3. i. Restructured accounts classified as standard advances will attract a provision of 2 per cent in the first two years from the date of restructuring. In cases of moratorium on payment of interest/principal after restructuring, such advances will attract a provision of 2 per cent for the period covering moratorium and two years thereafter (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances); and
ii. Restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2 per cent in the first year from the date of upgradation (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances).
4. All other instructions on provisioning will remain unchanged. The revised provisioning norms vis-a-vis the existing norms are also summarized in Annex.
Annex
Rates of Provisioning for Non-Performing Assets and Restructured Advances
| Category of Advances | Existing Rate (%) | Revised Rate (%) |
| Sub-standard Advances l Secured Exposures l Unsecured Exposures l Unsecured Exposures in respect of Infrastructure loan accounts where certain safeguards such as escrow accounts are available. | 10 20 15 | 15 25 20 |
| Doubtful Advances – Unsecured Portion | 100 | 100 |
| Doubtful Advances – Secured Portion l For Doubtful upto 1 year l For Doubtful > 1 year and upto 3 years l For Doubtful > 3 years | 20 30 100 | 25 40 100 |
| Loss Advances | 100 | 100 |
| Restructured accounts classified as standard advances l in the first two years from the date of restructuring ; and l in cases of moratorium on payment of interest/principal after restructuring – period covering moratorium and two years thereafter. | 0.25 to 1.00 (depending upon the category of advance) | 2 |
| Restructured accounts earlier classified as NPA and later upgraded to standard category l in the first year from the date of upgradation | 0.25 to 1.00 (depending upon the category of advance) | 2 |
Extract from the Monetary Policy Statement 2011-12
Enhancement of Rates of Provisioning for Non-Performing Assets
110. In pursuance of the announcement made in the Second Quarter Review of October 2009, banks were advised in December 2009 to achieve a provisioning coverage ratio (PCR) of 70 per cent for their non-performing advances by end-September 2010. This coverage ratio was intended to achieve a counter-cyclical objective by ensuring that banks build up a good cushion of provisions to protect them from any macroeconomic shock in future. In April 2011, banks were advised to segregate the surplus of provisions under the PCR vis-a-vis as required as per prudential norms as on September 30, 2010, into an account styled as "counter-cyclical buffer". While the "counter-cyclical buffer" so created would be available to banks for making specific provisions during economic downturns, there is a need for banks to make higher specific provisions also as part of the prudential provisioning framework. Accordingly, It is proposed to enhance the provisioning requirements on certain categories of non-performing advances and restructured advances as under:
l advances classified as "sub-standard" will attract a provision of 15 per cent as against the existing 10 per cent (the "unsecured exposures" classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the existing 20 per cent);
l the secured portion of advances which have remained in "doubtful" category up to one year will attract a provision of 25 per cent (as against the existing 20 per cent);
l the secured portion of advances which have remained in "doubtful" category for more than one year but upto 3 years will attract a provision of 40 per cent (as against the existing 30 per cent);
l restructured accounts classified as standard advances will attract a provision of 2 per cent in the first 2 years from the date of restructuring, or in cases of moratorium on payment of interest/principal after restructuring, for the period covering moratorium and 2 years thereafter (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances); and
l restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2 per cent in the first year from the date of upgradation (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances).
111. Detailed guidelines in this regard will be issued separately.
| Ashwin Nagar | FCA and SAP-Finance & Consolidations |
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18 May 2011
IndianCAs: AS-11- Applicability-31-03-2012 [1 Attachment]
[Attachment(s) from Ashwin Nagar included below]
Detailed notification is attached.
The date of applicabillity of treatment in respect of " AS-11" means the option to capitalise the foreign exchange fluctuation has been extended to 31st March, 2012 from 31st March, 2011.
Detailed notification is attached.
| Ashwin Nagar | FCA and SAP-Finance & Consolidations |
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17 May 2011
IndianCAs: CBEC on Restaurant and Hotels [1 Attachment]
[Attachment(s) from Ashwin Nagar included below]
CBEC's CLARIFICATION REGARDING SERVICE TAX ON HOTELS/RESTAURANTS
Clarification regarding service tax on Short-Term Accommodation Service and Restaurant Service
CIRCULAR NO. 139/8/2011-TRU, DATED 10-5-2011
Since the levy of service tax on the two new services relating to services provided by specified restaurants and by way of short-term hotel accommodation came into force with effect from 1st May, 2011, a number of queries have been raised by the potential tax payers.
2. These are addressed as follows:
Short-Term Accommodation Service:
| Sl. No | Queries | Clarification |
| 1. | What is the relevance of declared tariff? Is the tax required to be paid on declared tariff or actual amount charged? | "Declared tariff" includes charges for all amenities provided in the unit of accommodation like furniture, air-conditioner, refrigerators etc., but does not include any discount offered on the published charges for such unit. The relevance of 'declared tariff' is in determining the liability to pay service tax as far as short-term accommodation is concerned. However, the actual tax will be liable to be paid on the amount charged i.e., declared tariff minus any discount offered. Thus if the declared tariff is Rs. 1100 but actual room rent charged is Rs. 800 tax will be required to be paid @ 5% on Rs. 800. |
| 2. | Is it possible to levy separate tariff for the same accommodation in respect of corporate/privileged customers and other normal customers? | It is possible to levy separate tariff for the same accommodation in respect of a class of customers which can be recognized as a distinct class on an intelligible criterion. However, it is not applicable for a single or few corporate entities. |
| 3. | Is the declared tariff supposed to include cost of meals or beverages? | Where the declared tariff includes the cost of food or beverages, Service Tax will be charged on the total value of declared tariff. But where the bill is separately raised for food or beverages, and the amount is charged in the bill, such amount is not considered as part of declared tariff. |
| 4. | What is the position relating to off-season prices? Will they be considered as declared tariff? | When the declared tariff is revised as per the tourist season, the liability to pay Service Tax shall be only on the declared tariff for the accommodation where the published/printed tariff is above Rupees 1000. However, the revision in tariff should be made uniformly applicable to all customers and declared when such change takes place. |
| 5. | Is the luxury tax imposed by States required to be included for the purpose of determining either the declared tariff or the actual room rent? | For the purpose of service tax luxury tax has to be excluded from the taxable value. |
Services Provided by Restaurants:
| 1. | If there are more than one restaurants belonging to the same entity in a complex, out of which only one or more satisfy both the criteria relating to air-conditioning and licence to serve liquor, will the other restaurant(s) be also liable to pay Service Tax? | Service Tax is leviable on the service provide by a restaurant which satisfies two conditions: (i) it should have the facility of air conditioning in any part of the establishment and (ii) it should have license to serve alcoholic beverages. Within the same entity, if there are more than one restaurant, which are clearly demarcated and separately named, the ones which satisfy both the criteria is only liable to service tax. |
| 2. | Will the services provided by taxable restaurant in other parts of the hotel e.g., swimming pool, or an open area attached to a restaurant be also liable to Service Tax? | The taxable services provided by a restaurant in other parts of the hotel e.g., swimming pool, or an open area attached to the restaurant are also liable to Service Tax as these areas become extensions of the restaurant. |
| 3. | Is the serving of food and/or beverages by way of room service liable to service tax? | When the food is served in the room, service tax cannot be charged under the restaurant service as the service is not provided in the premises of the air-conditioned restaurant with a licence to serve liquor. Also, the same cannot be charged under the Short-Term Accommodation head if the bill for the food will be raised separately and it does not form part of the declared tariff. |
| 4. | Is the value added tax imposed by States required to be included for the purpose of service tax? | For the purpose of service tax, State Value Added Tax (VAT) has to be excluded from the taxable value. |
3. Trade Notice/Public Notice may be issued to the field formations and
| Ashwin Nagar | FCA and SAP-Finance & Consolidations |
Success is not permanent and failure is not final
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---------- Forwarded message ----------
From: Ashwin Nagar <ashwinnagar@yahoo.com>
Date: Wed, May 11, 2011 at 9:14 PM
Subject: CBEC on Restaurant and Hotels
To: Ashwin Nagar <ashwin.nagar@gmail.com>
From: Ashwin Nagar <ashwinnagar@yahoo.com>
Date: Wed, May 11, 2011 at 9:14 PM
Subject: CBEC on Restaurant and Hotels
To: Ashwin Nagar <ashwin.nagar@gmail.com>
| Ashwin Nagar | FCA and SAP-Finance & Consolidations |
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14 May 2011
PF Rate of Interest-9.5%
EMPLOYEES' PROVIDENT FUND : 9.5% NOTIFIED AS RATE OF INTEREST UNDER RULE 6(B) OF PART A OF FOURTH SCHEDULE
Rule 6(b) of Part A of Fourth Schedule to Income-tax Act, 1961 - Recognised Provident Fund - 9.5 per cent rate notified under rule 6(b) of part A of IVth Schedule - Supersession of Notification No. S.O. 2091(E), dated 26-8-2010
NOTIFICATION NO. 24/2011 [F.NO. 142/14/2010-SO (TPL)], DATED 13-5-2011
In exercise of the powers conferred by clause (b) of rule 6 of Part A of the Fourth Schedule to the Income-tax Act, 1961 (43 of 1961), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) number S.O. 2091(E), dated the 26th August, 2010, the Central Government hereby fixes, with effect from the 1st day of September, 2010, 9.5 per cent., as the rate referred to in the said clause.
--
Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
13 May 2011
MCA on XBRL-Amendment to Circular
FILING OF BALANCE SHEET & P&L ACCOUNT IN XBRL MODE - CORRIGENDUM
Filing of Balance Sheet and Profit and Loss Account in eXtensible Business Reporting Language (XBRL) mode - Corrigendum to Circular No. 9/2011, dated 31-3-2011
GENERAL CIRCULAR NO. 25 /2011, DATED 12-5-2011
The undersigned is to draw the attention on the Circular No. 9/2011 dated 31-3-2011 of this Ministry on the subject cited above. The following errata has been noticed which is rectified as under:-
2. In the said circular for clauses (i) and (ii) of paragraph 2 under the Heading Coverage in Phase I, the following shall be substituted and read as :-
"(i) All companies listed in India and their subsidiaries, having paid up capital of Rs. 5 crore and above or a turnover of Rs. 100 crore or above, excluding banking companies, insurance companies, power companies, Non-Banking Financial Companies (NBFCs) and overseas subsidiaries of these companies."
--
Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
ST Prosecution Guidelines
CBEC'S CLARIFICATION ON PROSECUTION PROVISION IN FINANCE ACT, 1994
Clarification regarding prosecution provision in Finance Act, 1994
CIRCULAR NO. 140/9/2011-SERVICE TAX, DATED 12-5-2011
With the enactment of Finance Act, 2011 (No.8 of 2011), Section 89 which provides for prosecution of specified offences involving service tax, becomes a part of Chapter V of Finance Act, 1994.
2. Prosecution provision was introduced this year, in Chapter V of Finance Act, 1994, as part of a compliance philosophy involving rationalization of penal provisions. Encouraging voluntary compliance and introduction of penalties based on the gravity of offences are some important principles which guide the changes made this year, in the penal provisions governing service tax. While minor technical omissions or commissions have been made punishable with simple penal measures, prosecution is meant to contain and tackle certain specified serious violations. Accordingly, it is imperative for the field formations, in particular the sanctioning authority, to implement the prosecution provision keeping in view the overall compliance philosophy. Since the objective of the prosecution provision is mainly to develop a holistic compliance culture among the tax payers, it is expected that the instructions will be followed in letter and spirit.
3. In the following paragraphs, some important aspects of the prosecution provision are explained, to guide the field formations:
4. Clause (a) of section 89(1) of Finance Act, 1994, is meant to apply, inter alia, where services have been provided without issuance of invoice in accordance with the prescribed provisions. In terms of rule 4A of the Service Tax Rules, 1994, invoice is required to be issued inter-alia within 14 days from the date of completion of the taxable service. Here, it should be noted that the emphasis in the prosecution provision is on the non-issuance of invoice within the prescribed period rather than non-mention of the technical details in the invoice that have no bearing on the determination of tax liability.
5. In the case of services where the recipient is liable to pay tax on reverse charge basis, similar obligation has been cast on the service recipient, though the invoices are issued by the service provider. It is clarified that the date of provision of service shall be determined in terms of Point of Taxation Rules, 2011. In the case of persons liable to pay tax on reverse charge basis, the date of provision of service shall be the date of payment except in the case of associated enterprises receiving services from abroad where the date shall be earlier of the date of credit in the books of accounts or the date of payment. It is at this stage that the transaction must be accounted for. Thus the service receiver, liable to pay tax on reverse charge basis is required to ensure that the invoice is available at the time the payment is made or at least received within 14 days thereafter and in the case of associated enterprises, invoice should be available with the service receiver at the time of credit in the books of accounts or the date of payment towards the service received.
6. Further, invoice mentioned in section 89(1) will include a bill or as the case may be a challan, in accordance with the Service Tax Rules, 1994. Invoice, bill, or as the case may be, challan, shall also include "any document" specified in respect of certain taxable services, in the provisos to Rule 4A and Rule 4B of Service Tax Rules, 1994.
7. Clause (b) of section 89(1) of Finance Act, 1994, refers to the availment and utilization of the credit of taxes paid without actual receipt of taxable service or excisable goods. It may be noted that in order to constitute an offence under this clause the taxpayer must both avail as well as utilize the credit without having actually received the goods or the service. The clause is not meant to apply to situations where an invoice has been issued for a service yet to be provided on which due tax has been paid. It is only meant for such invoices that are typically known as "fake" where the tax has not been paid at the so called service provider's end or where the provider stated in the invoice is non-existent. It will also cover situations where the value of the service stated in the invoice and/or tax thereon have been altered with a view to avail Cenvat credit in excess of the amount originally stated. While calculating the monetary limit for the purpose of launching prosecution, the value shall be the amount availed as credit in excess of the amount originally stated in the invoice.
8. Clause (c) of section 89(1) of Finance Act, 1994, is based on similar provision in the central excise law. It should be noted that the offence in relation to maintenance of false books of accounts or failure to supply the required information or supplying of false information, should be in material particulars have a bearing on the tax liability. Mere expression of opinions shall not be covered by the said clause. Supplying false information, in response to summons, will also be covered under this provision.
9. Clause (d) of section 89(1) of Finance Act, 1994, will apply only when the amount has been collected as service tax. It is not meant to apply to mere non-payment of service tax when due. This provision would be attracted when the amount was reflected in the invoices as service tax, service receiver has already made the payment and the period of six months has elapsed from the date on which the service provider was required to pay the tax to the Central Government. Where the service receiver has made part payment, the service provider will be punishable to the extent he has failed to deposit the tax due to the Government.
10. Certain sections of the Central Excise Act, 1944, have been made applicable to service tax by section 83 of Finance Act, 1994. Section 9AA of the Central Excise Act provides that where an offence has been committed by a company, in addition to the company, every person who was in charge of the company and responsible for conduct of the business, at the time when offence was committed, can be deemed guilty of an offence and can be proceeded against. A person so charged, however has an option to establish that offence was committed without his knowledge or he had exercised all due diligence to prevent the commission of offence.
11. Section 9C of Central Excise Act, 1944, which is made applicable to Finance Act, 1994, provides that in any prosecution for an offence, existence of culpable mental state shall be presumed by the court. Therefore each offence described in section 89(1) of the Finance Act, 1994, has an inherent mens rea. Delinquency by the defaulter of service tax itself establishes his 'guilt'. If the accused claims that he did not have guilty mind, it is for him to prove the same beyond reasonable doubt. Thus "burden of proof regarding non existence of 'mens rea' is on the accused".
12. It may be noted that in terms of section 89(3) of Finance Act, 1994, the following grounds are not considered special and adequate reasons for awarding reduced imprisonment:
(i) the fact that the accused has been convicted for the first time for an offence under Finance Act, 1994;
(ii) the fact that in any proceeding under the said 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.
On the above grounds, sanctioning authority cannot refrain from launching prosecution against an offender.
13. Sanction for prosecution has to be accorded by the Chief Commissioner of Central Excise, in terms of the section 89(4) of the Finance Act, 1994. In accordance with Notification 3/2004-ST dated 11th March 2004, Director General of Central Excise Intelligence (DGCEI), can exercise the power of Chief Commissioner of Central Excise, throughout India.
14. Board has decided that monetary limit for prosecution will be Rupees Ten Lakh in the case of offences specified in section 89(1) of Finance Act, 1994, to ensure better utilization of manpower, time and resources of the field formations. Therefore, where an offence specified in section 89(1), involves an amount of less than Rupees Ten Lakh, such case need not be considered for launching prosecution. However the monetary limit will not apply in the case of repeat offence.
15. Provisions relating to prosecution are to be exercised with due diligence, caution and responsibility after carefully weighing all the facts on record. Prosecution should not be launched merely on matters of technicalities. Evidence regarding the specified offence should be beyond reasonable doubt, to obtain conviction. The sanctioning authority should record detailed reasons for its decision to sanction or not to sanction prosecution, on file.
16. Prosecution proceedings in a court of law are to be generally initiated after departmental adjudication of an offence has been completed, although there is no legal bar against launch of prosecution before adjudication. Generally, the adjudicator should indicate whether a case is fit for prosecution, though this is not a necessary pre-condition. To launch prosecution against top management of the company, sufficient and clear evidence to show their direct involvement in the offence is required. Once prosecution is sanctioned, complaint should be filed in the appropriate court immediately. If the complaint could not be filed for any reason, the matter should be immediately reported to the authority that sanctioned the prosecution.
17. Instructions and guidelines issued by the Central Board of Excise and Customs (CBEC) from time to time, regarding prosecution under Central Excise law, will also be applicable to service tax, to the extent they are harmonious with the provisions of Finance Act, 1994 and instructions contained in this Circular for carrying out prosecution under service tax law.
18. Field formations may be instructed accordingly.
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