We are a Delhi-based engineering company providing services to various automobile manufacturers and authorised service centres. Since we do not have a dedicated finance team, we did not charge service tax from some of our customers on the repair services provided to them. Accordingly, our service tax liability during the last two years remains short paid to that extent. We have come to know about the amnesty scheme that has been introduced in the Budget 2013-14. We now wish to charge service tax from our customers upon issuance of a supplementary invoice and pay our service tax dues to the government under the amnesty scheme.

Kindly advise whether our customers will be entitled to avail of the credit of service tax charged by us now.

Any entity which has not fully discharged its service tax liability for the period October 2007 to December 2012 may avail of the Voluntary Compliance Encouragement Scheme (VCES) on the condition that it files a truthful declaration of service tax dues of the last five years, i.e., since October, 2007 and makes the payment of service tax in one or two installments before the due dates prescribed i.e. December 31, 2013 and June 30, 2014. Upon fulfillment of all the prescribed conditions, the government shall waive the payment of interest, penalty and other penal consequences.

Subject to the commercial terms, the service tax so paid by you may be recovered from your customers upon issuance of supplementary invoices. In this regard, recently the Central Board of Excise and Customs (CBEC) vide Circular No. 170/5/2013 dated August 8, 2013 has clarified inter-alia that for the service tax payment made by you in cash, the service recipient can avail of the Cenvat credit on the basis of the supplementary invoices subject to the provisions of the Cenvat Credit Rules, 2004.

Sale in course of import exempt from CST

Our company has recently set up its operations in India. We are engaged in the import and sale of household goods and we don?t have any warehouse in India as yet. Currently, we import goods from our parent company on receipt of a purchase order from our distributors. However, our distributors are refusing to pay us the VAT/CST charged by us as they claim that this transaction qualifies as ?sale in the course of import?. Can you please explain this concept to us?

As per Section 5 (2) of the Central Sales Tax Act, 1956, a sale or purchase of goods shall be deemed to have taken place in the course of the import of goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.

Sale in the course of import into India is exempt from CST. The test for deciding whether the purchase or sale had occasioned import is pointed out in K.G.Khosla?s case reported in (1966) 17 STC 473(SC). It was held that when the movement of goods from foreign country to India was in pursuance of the condition of the contract between the importer and the subsequent buyer in India and there was no possibility of these goods being diverted by the importer for any other purpose, the sale must be held to have taken place in the course of import of goods.

In your case, subject to the precise terms and conditions of your contract with the distributors, the transaction may qualify as sale in the course of import subject to the fulfillment of the conditions laid down by various judicial precedents, and hence, be exempt from CST.

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