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Service tax: Fresh summons being issued to shipping cos
November, 11th 2006


Court hearing of shipowners' plea to come up on November 24

Shipping companies are being slapped with fresh summons by the Director General of Central Excise Intelligence (DG-CEI), asking them to submit full details of the services availed by their ships at foreign ports from August 2002 to March 2006, for the purpose of assessing the cumulative service tax.

This comes even while a writ petition filed by the Indian National Shipowners Association (INSA), on the issue of payment of service tax with retrospective effect from August 2002, is yet to come up for hearing.

Filed before the High Court in early June this year, the petition is now slated to come up for its first hearing on November 24, after it was repeatedly put off during this period.

Mounting pressure

INSA had filed the petition after the DG-CEI began to apply pressure to pay service tax retrospectively from August 2002 to March 2006. In this connection, it had issued summons to the companies, asking them "full details" of the services availed by their ships at foreign ports, their foreign exchange payments, including dry-docking expenses and other invoice details.

Industry sources said that DG-CEI issued fresh summons to the companies last month. Their plea that as the matter was pending before the court, the step could be sub-judice did not cut ice with the DG-CEI it sent letters to the companies, giving them time till November 3 to submit the details sought.

Legal experts view

As DG-CEI stepped up the pressure, INSA was prompted to seek the views of legal experts in the last few days. The dominant view of the experts seemed to be that the DG-CEI had the prerogative to demand information, as long as it was not demanding payment of the tax with retrospective effect, according to the sources.

Against this background, INSA thought it better to play it safe and asked its member companies to comply with the DG-CEI summons by furnishing the details sought. While some companies have submitted part of the details, others have sought time in their individual capacities from DG-CEI.

"Gathering complete details about foreign exchange payments made since August 2002 can be a time-consuming process. And then all the companies were busy last month wrapping up their half-yearly results," an industry representative said.

Industry sources say the net service tax for the retrospective period would total nearly Rs 80-100 crore, especially as 2004-05 was a boom time for the industry and ships had to undergo extensive dry-docking at foreign ports.

Amit Mitra

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