No service tax on events

CHATROOM / Tax is on the services provided for managing an event and not on the event itself

TNC Rajagopalan will answer questions from readers on SME-related issues pertaining to taxes, exim policies or registrations/reservations, etc. Readers can send mails to smequeries@business-standard.com

We are manufacturing dutiable as well as non-dutiable products. We take Cenvat credit of duties paid on the inputs. Whenever we clear non-dutiable products, we reverse proportionate Cenvat credit of duties relating to inputs used in the non-dutiable product. Central excise officials are objecting to this practice. Kindly clarify the correct position.

As per sub-rule (1) of rule 6 of cenvat credit rules 2004, no Cenvat credit shall be allowed on such quantity of inputs which is used in the manufacture of exempted goods. The said sub-rule also makes an exception of the circumstances in which such credit on inputs used for the exempted goods can be availed.

Sub-rule (2) of the rule gives an option to the manufacturer to maintain separate accounts for receipt, consumption and inventory of inputs meant for use for the manufacture of exempted and dutiable goods and in case, he does not opt for the separate records, clause (b) of sub-rule (3) requires a manufacturer to pay an amount equal to 10 per cent of the total price of the exempted goods excluding sales tax and other taxes as paid.

Thus, it is clear that the option to maintain the separate accounts or payment of 10 per cent of the price of the exempted goods can be exercised only in respect of common inputs used for the manufacture of dutiable and exempted goods.

Where any inputs are clearly identifiable as used only in or in relation to the manufacture of final products which are exempt from payment of duty, Cenvat credit is not admissible on such inputs which are used exclusively for the manufacture of exempted final products. The circumstances specified in sub-rule (2), sub-rule (3) do not cover, or envisage availment of credit on inputs used exclusively for the manufacture of exempted final products.

Therefore, no credit can be taken on inputs which are used exclusively in or in relation to the manufacture of exempted final products.

In this connection, you may refer to CBEC circular No. 754/70/2003-CX, dated 9-10-2003 issued from file no 267/48/2003-CX-8.

We are an association of small scale industries. To facilitate marketing of goods of our members, we have organised an exhibition, where we provide all the infrastructure facilities like stall, advertising space, furniture, cabins, security, electricity, etc. We are soliciting participation by our members and have fixed a fee that the participants have to pay for the facilities. We are not clear whether we have to pay service tax under the head 'Event Management'.

As per sub-section 40 of section 65 of the Finance Act, 1994, event management means any service provided in relation to planning, promotion,organising or presentation of any arts, entertainment, business, sports or any other event and includes any consultation provided in this regard. Sub-section 41 of the said section 65 says that "event manager" means any person who is engaged in providing any service in relation to event management in any manner; section 65(105) (zu) defines 'taxable' service as any service provided or to be provided to a client, by an event manager in relation to event management.

An event manager is hired to execute an event such as a product launch of any corporate, promotional activities, exhibitions and private functions, etc. Event manager uses his expertise and ideas to manage an event. Service tax instruction F.No. B11/1/2002""TRU clarifies this position. Service tax is on the services provided for managing an event and not on the event itself. So, for occurrence of the taxable event, i.e., the 'provision of event management service' there has to be a sponsor at whose behest an event is organised and an event manager organises such services.Therefore, no service tax is leviable in your case as you are the sponsor organising the event yourself and you have not hired any event manager nor are you an event manager hired by anyone else.

CBEC circular No. 68/17/2003-S.T., dated 28-11-2003 issued from file no. F. No. 228/1/2003-CX.4 clarifies the position.

We are using hi-speed diesel (HSD) for generation of power and furnace oil as fuel for our boilers. Can we get duty drawback of the duties paid on the same in proportion to their use in export production?

Please refer to CBEC circular no 27/2005 dated 13.06.2005 (issued from file no. 605/44/1994-DBK), where it is clarified that the incidence duty on HSD/furnace oil needs to be factored in the brand rates and special brand rates of duty drawback determined under rule 6 and rule 7 of the customs and central excise duties drawback rules, 1995 for exports made from 5-5-2005 onwards. In fact, the incidence of duty on HSD/furnace oil has been factored in the calculation of the all industry rates of duty drawback, 2005-06.

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