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Coke, Lufthansa slapped notice for tax evasion
June, 05th 2008

Coca-Cola India Inc, Lufthansa Airlines and Era Infra Engineering Ltd have been slapped demand notices for not paying of service tax. The anti-evasion wing of the service tax department has in fact issued nine such demand notices amounting to Rs 77 crore in May this year to various Companies.

This is the latest in a slew of efforts by the service tax department in recent months to step up compliance as along with overall growth of 35% in collections last financial year, certain sectors have contributed less than usual to the exchequer's kitty. Sectors including telecom, air travel agents, tour operators, convention service and forward contracts service have registered a negative growth in service tax collections. In the current instance, the department has issued a demand notice of Rs 8.55 crore to the cola giant for non-payment of service tax on 'out of pocket' expenses between April 2003 and April 2007. Out of pocket expenses include those expenses not included in the value of the contract, such as those on travelling, lodging and reimbursement for the use of man and machinery. When contacted, Coca Cola India spokesperson said, "We are in the process of filing a suitable reply to the said notice."

Lufthansa has been issued a demand notice amounting to Rs 6.16 crore for non-payment of service tax on the full value of fare for non-Economy class passengers embarking by air in India for international journeys. The period of evasion is from May 2006 to September 2007, as per the notice.

Airlines divide the full fare amount into a number of categories and the basic fare is just a small part of it. Official sources said the German carrier was not paying tax on the full fare but only on the basic fare.

One of the larger service tax evasion cases involves construction major Era Infra Engineering Ltd. The department has sent it a demand notice for payment of Rs 35.54 crore for wrongly availing abatement between 2004 and 2007, as it did not include the value of free supplies while calculating its service tax bill. Meanwhile, the service tax department has also sent a show cause notice to Delhi-based Shiv-Vani Oil and Gas Exploration Services Ltd amounting to Rs 43.81 crore. The show cause notice alleges non-payment of service tax on a number of activities including work over operations, development well drilling, shot hole and seismic job service, gas compression services and job services for data acquisition. All these services are taxable under the category of 'survey and exploration of mineral services', 'business auxiliary service' and 'mining services.'

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