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Indirect Tax

Chapter V of the Finance Act, 1994 – Introduction of Service Tax

Summary: Chapter V of the Finance Act, 1994 laid the legal foundation for the levy and collection of service tax in India. It granted authority to the Central Government to impose a tax on specified services rendered in India, excluding those in Jammu and Kashmir (at the time). This marked the beginning of indirect taxation on services in India.

Key Provisions:

  • Section 64: Extent and commencement of service tax law.
  • Section 65: Definitions of taxable services and related terms.
  • Section 66: Charging section – specifies the rate and charge of service tax.
  • Section 67: Valuation of taxable services.
  • Section 68: Payment of service tax – responsibility placed on the service provider or receiver in certain cases.
  • Sections 69–96I: Cover registration, returns, penalties, adjudication, and appellate mechanisms.

Current Status: After the implementation of the Goods and Services Tax (GST) on 1st July 2017, service tax under Chapter V has been subsumed into GST, and this chapter is no longer in effect for current taxation purposes.

Section 1 – Short Title, Extent and Commencement

This section outlines the basic administrative details of the Act:

  • Specifies the name of tfvhe legislation as the Finance Act, 1994.
  • Declares its applicability across the territory of India (except Jammu & Kashmir at the time of enactment).
  • Mentions the effective date from which the Act comes into force as notified by the Central Government.
Section 2 – Definitions

Provides key definitions that are used throughout the Act:

  • Defines terms such as "assessee", "service", "taxable service", "service provider", and "service receiver".
  • Clarifies technical expressions necessary for the interpretation and application of the Act.
  • Enables consistent and uniform enforcement of service tax provisions.

Section 3 – Inter-State Sale or Purchase

A sale or purchase is considered inter-State when it occasions the movement of goods from one State to another or is effected by transfer of documents during such movement.

Section 4 – Sale or Purchase Outside a State

A sale or purchase is deemed to take place outside a State if the goods are within the State at the time the contract is made and no inter-State movement occurs.

Section 5 – Sale or Purchase in the Course of Import or Export

A sale or purchase is deemed in the course of import or export if it either occasions such import/export or is effected by transfer of documents while goods are beyond Indian customs frontiers.

Section 6 – Liability to Tax on Inter-State Sales

Every dealer is liable to pay tax on all inter-State sales unless the sale is exempt under the Act.

Section 6A – Burden of Proof in Case of Stock Transfers

Dealers must prove that goods transferred to other States were not sales but stock transfers to avoid CST liability.

Section 7 – Registration of Dealers

Dealers making inter-State sales must register under the CST Act and obtain a registration certificate.

Section 8 – Rates of Tax on Inter-State Sales

Specifies concessional tax rates for inter-State sales made to registered dealers and general rates for others.

Section 8A – Determination of Turnover

Outlines how to calculate a dealer’s turnover for CST purposes by deducting taxes, returns, and similar adjustments.

Section 9 – Levy and Collection of Tax and Penalties

Tax and penalties under CST are levied and collected by the appropriate State Government as if it were local sales tax.

Section 9A – Collection of Tax Only by Registered Dealers

Only registered dealers are permitted to collect Central Sales Tax from buyers.

Section 9B – Rounding Off of Tax, etc.

Permits rounding off of tax amounts as per prescribed rules or State laws.

Section 10 – Penalties

Prescribes penalties for false declarations, misuse of registration, or other violations under CST.

Section 10A – Penalty in Lieu of Prosecution

Provides for a monetary penalty instead of prosecution for certain CST offences.

Section 11 – Cognizance of Offences

No court shall take cognizance of CST offences without prior sanction of the State Government.

Section 12 – Indemnity

Protects government officers from legal proceedings for actions taken in good faith under the CST Act.

Section 13 – Power to Make Rules

Empowers the Central Government and State Governments to make rules for implementing provisions of the CST Act.

Section 14 – Declared Goods

Lists goods of special importance (e.g., iron, steel, cotton) declared under the Constitution that are subject to uniform tax treatment across States.

Section 15 – Restrictions and Conditions on Taxation of Declared Goods Within a State

Imposes restrictions on States regarding the rate of tax, trade restrictions, and levy procedures on declared goods to ensure uniformity and free trade.

Section 16 – Definitions

Defines key terms used in the CST Act, such as "dealer," "declared goods," and "place of business."

Section 17 – Company in Liquidation

Specifies procedures and obligations for liquidators of companies under liquidation regarding CST dues.

Section 18 – Liability of Directors of Private Company in Liquidation

Holds directors of a private company jointly and severally liable for CST dues if the company goes into liquidation and dues are unpaid.

Section 19 – Central Sales Tax Appellate Authority

Establishes the CST Appellate Authority for deciding appeals on advance rulings and related matters.

Section 19A – Vacancies, etc., not to invalidate proceedings

States that vacancies or procedural irregularities won’t invalidate proceedings of the Authority.

Section 20 – Appeals

Provides for filing appeals before the CST Appellate Authority against advance rulings.

Section 21 – Procedure on receipt of application

Outlines how the Authority should process applications or appeals received under the Act.

Section 22 – Powers of the Authority

Grants the Authority powers similar to a civil court for enforcing attendance, examining witnesses, etc.

Section 23 – Procedure of Authority

Empowers the Authority to regulate its own procedure, consistent with the Act.

Section 24 – Authority for advance rulings to function as Authority under this Act

Allows the Advance Ruling Authority under the Income-tax Act to act as the Authority under CST Act.

Section 25 – Transfer of pending proceedings

Permits transfer of ongoing proceedings to the CST Appellate Authority after its constitution.

Section 26 – Applicability of order passed

Clarifies that advance rulings or orders passed by the Authority are binding on the applicant and the jurisdictional tax authorities.

f
CHAPTER I – Preliminary

Contains definitions and preliminary provisions to guide the interpretation and implementation of the Act:

  • Defines key terms such as "excisable goods", "factory", "manufacturer", etc.
  • Lays the foundation for the scope and application of excise laws.
CHAPTER II – Levy and Collection of Duty

Governs the imposition and recovery of central excise duty:

  • Duty levied on manufacture or production of excisable goods in India.
  • Specifies rates, valuation, and procedure for assessment and collection.
CHAPTER IIA – Indicating Amount of Duty in the Price of Goods, etc., for Purpose of Refund and Crediting Certain Amounts to the Fund

Addresses duty indication and refund mechanisms:

  • Mandates separate mention of excise duty in price invoices.
  • Introduces the principle of unjust enrichment to prevent wrongful refunds.
CHAPTER III – Powers and Duties of Officers and Landholders

Defines roles of excise officers and responsibilities of landholders:

  • Specifies powers such as search, seizure, and arrest.
  • Outlines landholder obligations related to excise control and access.
CHAPTER IIIA – Advance Rulings

Provides a mechanism for advance legal clarification:

  • Applicants can seek binding rulings on excise duty liability.
  • Enhances certainty and reduces litigation for businesses.
CHAPTER IV – Transport by Sea

Earlier regulated sea transport of excisable goods:

  • Now omitted by Section 139 of the Finance Act, 2002.
CHAPTER V – Settlement of Cases

Facilitates amicable settlement of excise disputes:

  • Permits assessees to approach the Central Excise Settlement Commission.
  • Aims to reduce prolonged litigation and resolve cases efficiently.
CHAPTER VI – Adjudication of Confiscations and Penalties

Deals with adjudication procedures:

  • Authorities empowered to confiscate goods and impose penalties for violations.
  • Ensures due process in enforcement actions.
CHAPTER VIA – Appeals

Lays down the appellate structure and process:

  • Provides right to appeal orders to Appellate Commissioner or Tribunal.
  • Specifies time limits and procedures for filing appeals.
CHAPTER VIB – Presumption as to Documents

Establishes evidentiary presumptions:

  • Certain documents are presumed to be genuine unless proven otherwise.
  • Facilitates administrative efficiency in adjudication and appeals.
CHAPTER VII – Supplemental Provisions

Includes residual powers and procedural rules:

  • Empowers Central Government to make rules and issue notifications.
  • Provides for delegation, exemption, and other supplemental matters.
SCHEDULES

Contain tariff schedules and classifications:

  • Specify excisable goods and their corresponding duty rates.
  • Forms the basis for levy and valuation of duty.

Chapter I – Preliminary

Provides definitions and interpretative provisions to apply the Act effectively.

  • Defines terms such as “customs port”, “goods”, “import”, and “export”.
Chapter II – Officers of Customs

Specifies classes of customs officers and their powers.

  • Includes Commissioners, Superintendents, and Appraisers.
  • Empowered to enforce customs laws and perform related duties.
Chapter III – Appointment of Customs Ports, Airports, etc.

Provides for official designation of customs stations for trade operations.

  • Includes ports, airports, ICDs, and land customs stations.
Chapter IV – Prohibitions on Importation and Exportation of Goods

Lists prohibited or restricted goods under customs and allied laws.

  • Supports national interest, health, environment, and security.
Chapter IVA – Detection of Illegally Imported Goods and Prevention of the Disposal Thereof

Introduces provisions for tracing and restricting illegal imports.

  • Allows seizure and tracking of suspect goods.
Chapter IVB – Prevention or Detection of Illegal Export of Goods

Provides safeguards against unauthorized exports.

  • Authorizes monitoring, inspection, and preventive action.
Chapter IVC – Power to Exempt from the Provisions of Chapters IVA and IVB

Empowers government to grant exemptions from anti-smuggling provisions in special cases.

  • Used in public interest or under exceptional circumstances.
Chapter V – Levy of, and Exemption from, Customs Duties

Deals with the charge, assessment, and exemptions of customs duty.

  • Includes valuation principles and tariff classification.
Chapter VA – Indicating Amount of Duty in the Price of Goods, etc., for Purpose of Refund

Requires disclosure of duty amounts to enable refund and avoid unjust enrichment.

  • Mandatory for all invoices where customs duty applies.
Chapter VB – Advance Rulings

Facilitates binding advance rulings to clarify customs matters in advance.

  • Available to importers/exporters and joint ventures.
Chapter VI – Provisions Relating to Conveyances Carrying Imported or Exported Goods

Regulates movement and clearance of goods-carrying vessels and vehicles.

  • Includes filing of Import General Manifest (IGM) and Export General Manifest (EGM).
Chapter VII – Clearance of Imported Goods and Export Goods

Outlines procedures for customs clearance of goods.

  • Includes self-assessment, examination, and release protocols.
Chapter VIIA – Payments Through Electronic Cash Ledger

Introduces an e-ledger system for streamlined duty payments.

  • Reduces manual intervention and improves transparency.
Chapter VIII – Goods in Transit

Governs in-transit goods movement within Indian territory.

  • Includes transshipment rules and supervision of cargo.
Chapter IX – Warehousing

Facilitates bonded warehousing of imported goods without immediate duty payment.

  • Provides terms for warehousing, bonding, and clearance.
Chapter X – Drawback

Provides for refund of duties on inputs used in exported goods.

  • Promotes exports by neutralizing input duty costs.
Chapter XA – Special Provisions Relating to Special Economic Zone

Outlines customs facilitation and duty exemptions for SEZs.

  • Supports export-oriented development within SEZs.
Chapter XI – Special Provisions Regarding Baggage, Goods Imported or Exported by Post, and Stores

Deals with customs procedures for personal and postal imports/exports.

  • Includes exemptions and duties applicable to ship and aircraft stores.
Chapter XII – Provisions Relating to Coastal Goods and Vessels Carrying Coastal Goods

Regulates movement of goods between Indian ports by coastal vessels.

  • Requires declaration and registration with customs authorities.
Chapter XIIA – Audit

Empowers customs authorities to audit records of importers and exporters.

  • Ensures compliance and identifies duty evasion or errors.
Chapter XIII – Searches, Seizure and Arrest

Defines powers and procedures for enforcement actions under customs law.

  • Allows search and seizure of premises, goods, and arrest of persons.
Chapter XIV – Confiscation of Goods and Conveyances and Imposition of Penalties

Specifies procedures and grounds for confiscation and penalties.

  • Applies to goods violating customs laws and their conveyances.
Chapter XIVA – Settlement of Cases

Provides a mechanism to settle customs disputes through the Settlement Commission.

  • Used for voluntary disclosures and quicker resolution.
Chapter XV – Appeals and Revision

Lays down appellate framework for redressal of grievances.

  • Includes appellate authorities like Commissioner (Appeals), CESTAT, and High Courts.
Chapter XVI – Offences and Prosecutions

Lists punishable offences and prosecution procedures.

  • Includes smuggling, duty evasion, and obstruction of customs officers.
Chapter XVII – Miscellaneous

Contains residual powers and administrative provisions.

  • Includes rule-making powers and saving clauses.
Chapter VAA – Administration of Rules of Origin under Trade Agreement

Empowers enforcement of origin rules for preferential trade agreements.

  • Ensures compliance and prevents misuse of trade concessions.

The Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001

Levies a tax on the entry of specified goods into local areas of Andhra Pradesh to compensate for loss of revenue due to such entry.

The Andhra Pradesh Tax on Entry of Motor Vehicles into Local Areas Act, 1996

Imposes a tax on the entry of motor vehicles into local areas in Andhra Pradesh, especially those not previously registered within the state.

The Haryana Tax on Entry of Goods into Local Areas Act, 2008

Provides for levy of tax on entry of goods into any local area in Haryana for use, consumption, or sale to augment state revenue.