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Smile, no service tax on photo ID Detaxification
June, 30th 2007

Preparation of photo identity cards not a photographic service.

The photographer may always be at your service, but does that mean all photographic activity should come under the purview of service tax? In a case before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT)-Bangalore that asked this very question, Hyderabad-based Bajrang Infotech Systems sought a stay on the Revenue Departments move to bring its activity of production of electoral photo identity cards and bus passes for APSRTC under service tax. The app ellant sought waiver of pre-deposit of service tax of Rs 41,63,076 for the purpose.

Their contention was that taking of photos for identity cards for electoral purposes and for bus passes cannot be considered a Photographic Service, as the service normally entails maintenance of a separate studio and the photographs are taken on full length and from various angles, which is not so in this particular case.

(In a similar matter, the Hyderabad Commissionerate had accepted the assessees plea in the case of CMC Ltd and rejected the Revenue Departments stay application.)

On careful consideration, the judges ruled that the preparation of photo identity cards cannot be considered to come under the category of Photographic Services. In common parlance, photographic service includes development of negatives. It also includes taking photos of animate or inanimate objects either still or in motion, while in this case, only the face portion is photographed directly on the identity card.

The appeal comes up for final hearing on July 23, 2007.

Dirty linen

Did you know that all soaps are not strictly soaps in the eyes of the law? Of course, we are not talking about soaps of the saas-bahu variety but what we use to scrub, scour and clean. In the Naga Ltd vs the Central Excise Commissionerate, Tiruchi case, the Supreme Court decreed that Vim Dish Wash Bar, the companys product, was not a soap, thereby rejecting the Revenue Departments plea that it be allowed to levy 30 per cent duty.

The company said that the product should be classified under a sub-heading referring to scouring pastes and powders and other scouring preparations, and attracting duty at the rate of 20 per cent. The Department wanted to classify the product under 3401.20, a heading about organic surface-active products and preparations for use as soap in the form of bars, cakes moulded pieces or shapes.

The judges held that the relevant sub-heading was not applicable to the case in question. Vim Dish Wash Bar is not a soap. We also find merit in the contention that it is not an organic surface-active product for use as a soap, but it is used for scouring. In the circumstances, Heading No 3401.20 is not applicable.

They also said that since it was a mixture of detergent and abrasive powders, Rule 3(b) of the Rules of interpretation would also apply, as the chemical examiners have indicated that predominantly the product in question contains abrasive powder to the extent of 62-72 per cent. Finding no merit in the civil appeals, they dismissed them with no order as to costs.

Wheel of justice

A rose by any name smells as sweet, but a rim assembly by any other name, especially wheel, does not sound sweet at all to the Revenue Department, which hauled up Wheels India Ltd before the Supreme Court for non-payment of duty on rim assembly, which the company claimed was a wheel.

The Department alleged that the rim assembly has been cleared at nil rate of duty on the assumption that the assessee was entitled to the benefit of Notification No. 76 of 1986 as parts of animal-driven vehicle (ADV). According to the Department, a wheel in the case of ADV would consist of a rim, a disc, a lock ring and a flange. The disc was an essential part of the wheel in ADV; it is fixed to the axle and without the disc, the rim assembly would not qualify for description as wheel. In these circumstances, the Department said that rim assembly cannot be called a wheel and therefore, the assessee was not entitled to the benefit of exemption.

The judges agreed with the Department, stating that the show cause clearly alleges that in the case of ADV, there is no wheel without the disc. There is no reply given on this particular aspect by the assessee to the notice. There is no clear plea taken by the assessee that in the case of ADV wheel can exist without the disc.

While issuing the ruling, the judges also stated that the civil appeal was being dismissed as the assessee had not given a clear answer to the specific allegation made by the Department. However, it will not preclude the assessee from raising appropriate pleas for subsequent period. The demand for the period between 1-4-1998 to 31-8-2000 shall stand confirmed.

Point of debate

Moving a decimal point can prove almost costly, as Lakshmi Vilas Bank learned while filing claims for deduction for bad debts.

For the 1994-95 assessment year, when the corresponding accounting year had ended on March 31, 1994, the bank filed return of income admitting total income of Rs 8,46,04,647 on November 28, 1994. The same was processed and total income was determined at Rs 9,82,96,869. The assessment was completed under Section 143(3) determining the total income at Rs 13,01,03,800. While completing the assessment, the assessing officer found that the assessee had made excess claim amounting to Rs 25,62,640, which was disallowed while computing the deduction under Section 36(1)(viia) of the Income-Tax Act.

The assessee had attributed the advance to Thottiam Branch as Rs 7,11,83,542, when total advance for the whole year was only Rs 8,54,20,251. When the mistake was brought to its notice, the assessee agreed that there was a mistake and that the same had crept in on account of misplacement of decimal point.

The Revenue Department promptly levied a penalty, which was set aside by the Income Tax Appellate Tribunal, after which the matter came up before the Madras High Court.

The court held that misplacement of a decimal cannot tantamount to concealment of particulars or furnishing inaccurate particulars and that the computation was only due to misplacement of a decimal point.

Concealment of income and furnishing of inaccurate particulars are different. Under these circumstances, no substantial questions of law arise for consideration of the court and accordingly, the case is dismissed. No costs.

D. Murali
C. Ramesh

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