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TMI Blog2016 (3) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... al or final entry the same will be covered under the debit entries as specified under the explanation. Therefore there is no scope in the said explanation to give different treatment to the provisional entries or final entry. So, once debit entries were made even though provisional basis and subsequently final entries are made, it is only the adjustment in the books of account and for this reason the entries made at the first time cannot be said to be irrelevant for deciding the point of taxation. Demand of interest and penalties under Section 76 & 77 of the Customs Act, 1962 - Held that:- the service tax became due in accordance with the date of provisional entries made first time by the respondent in their books of account. Therefore, there is a delay in payment of service tax which attracts interest. With regard to imposition of penalties, the show cause notice was issued for demand of interest and there is no dispute regarding the payment of service tax. As the issue involved is in the nature of interpretation of valuation section and the penal provisions are invoked only for non-payment or short payment of service tax. Therefore, it is only for demand of interest and the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event. The Ld. Commissioner also held that the respondent cannot be considered as Associate Enterprises' as they did not satisfy the criteria of the Associate Enterprises' under Section 92A of the Income Tax Act, 1961 along with Chapter X of the Income Tax Act. Therefore, the definition of gross amount charged' as provided in the Explanation to Section 67 of the Finance Act, 1994 does not come into play. Being aggrieved by the order of the Ld. Commissioner (Appeals) Revenue filed this appeal. 3. Shri B. Kumar Iyer, Ld. Superintendent (A.R.) appearing on behalf of the Revenue, reiterating the grounds of appeal submits that as regard the status of Associate Enterprises', the Ld. Commissioner while holding, that the respondent are not Associate Enterprises, has not given any reasoning. He submits that the respondent is an Associate Enterprises in terms of Section 92A of the Income Tax Act. This has not been disputed by the respondent during the adjudication therefore at this stage the respondent cannot dispute the status of their being an Associate Enterprises. As regard the delay in payment of service tax under Section 67 and its explanation make very clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price. (2) Where in an international transaction or specified domestic transaction, two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm's length price of such benefit, service or facility, as the case may be. (2A) Any allowance for an expenditure or interest or allocation of any cost or expense or any income in relation to the specified domestic transaction shall be computed having regard to the arm's length price. (3) The provisions of this section shall not apply in a case where the computation of income under sub-section (1) or sub-section (2A) or the determination of the allowance for any expense or interest under sub-section (1) or sub-section (2A), or the determination of any cost or expense allocated or apportioned, or, as the case may be, contributed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, franchises or any other business or commercial rights of similar nature, or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights; or (h) ninety per cent or more of the raw materials and consumables required for the manufacture or processing of goods or articles carried out by one enterprise, are supplied by the other enterprise, or by persons specified by the other enterprise, and the prices and other conditions relating to the supply are influenced by such other enterprise; or (i) the goods or articles manufactured or processed by one enterprise, are sold to the other enterprise or to persons specified by the other enterprise, and the prices and other conditions relating thereto are influenced by such other enterprise; or (j) where one enterprise is controlled by an individual, the other enterprise is also controlled by such individual or his relative or jointly by such individual and relative of such individual; or (k) where one enterprise is controlled by a Hi ndu undivided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation.- For the purposes of this section,- (a) consideration includes any amount that is payable for the taxable services provided or to be provided; (b) agency includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellors cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value; (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty and hence posit that the feasibility of determination of consideration with accuracy should be the criteria for determining the taxable event. The certainty and clarify required of taxing statutes cannot leave such a critical aspect as taxable event to the whims of a contract between two entities or to be conditional upon a perfection sought for in such contracted agreement. The delivery of the service at its destination becomes the taxable event subject, by the law as it then stood, to payment for the service. With the insertion of the Explanation in Rule 6 of Service Tax Rules, 1994, effective from 10 th Mary 2008 such payment was imbued with a more comprehensive meaning in so far as transaction between associated enterprises is concerned. The value was not restricted to payment per se but was liable to supplemented by accounting entries relating to the service transacted between associated concerns. That is the conclusion arrived at by the original authority before proceeding to hold that the books entries made at the end of each month determines the point at which the tax is liable to be paid. 10. The learned Counsel for the appellant would submit that the agreement spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents often serve to delay or defer tax payment without loss of stakeholder value and this deeming provision aims to disincentivize such tendencies. It is quite probable that the intent of the appellant and the associated concerns may not have been so but such a distinction based on intent, as the learned Counsel would have us accept, does not only not find a place in the provision but is also anathema to non-discriminatory taxation. The deeming effect of the Explanation has to be applied wherever accounting entries relating to the service transaction finds a place in the books of the person liable to pay the tax. 12. The learned Counsel for the appellant has attempted to lay emphasis on the debit entry in the books of the person liable to pay tax as the due date intended in Explanation in Rule 6. This restrictive interpretation of legislative intent has drawn upon the assumption that the debit and credit are independent unconnected entries in books of accounts and that, for the purposes of the Explanation, debit entry is all that is relevant when tax liability devolves on the recipient of service. In this attempt it has been overlooked that the Explanation is unambiguous about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he service provider. As this happens to be at variance with the provisions of Rule 6 of Service Tax Rule, 1994 and Rule 7 of Point of Taxation Rules, 2011, the tax liability needs to be computed for each month on the amount booked in the royalty accrued account with the reversal being taken into account whenever that has occurred. Needless to state, in such month, it would be tantamount to taxes paid in advance and liable to be adjusted against taxes due in the month(s) thereafter. Owing to absence of any definite computation in the impugned order and the claim of reversal, as well as that of tax payment, not having been doubted in the impugned order, it would appear that tax liability has indeed been discharged in full though belatedly in some months. A test computation for July to September 209 and April to June 2011, relating to which extracts of ledger have been furnished in these proceedings, after allowing exemption of service tax on related intellectual property service to the extent of Research Development cess paid as per notification 17/2004-ST dated 10 th September 2004, has confirmed it to be so. There being no alternative finding in the impugned order, we find no r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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