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Summons issued to shipping companies on service tax issue

Amit Mitra

Mumbai , Nov. 2

THE Indian shipping industry's service tax woes do not appear to have ended. Just when it thought it had heard the last word on the issue after the Government issued a clarification in June, indicating that the services that Indian ships availed themselves of at foreign ports, would be exempted from the tax, shipping companies last week received an unexpected missive from the Director-General of Central Excise Intelligence (DG-CEI).

Informed sources told Business Line that the DG-CEI issued summons to many shipping companies to appear before it and provide payment details of the services they had availed themselves of at foreign ports since 2002.

Understandably, this has come as a bolt from the blue for the shipping industry. Confusion followed the summons, as shipping companies were unable to understand why they should be asked to detail the services their ships employed in foreign ports for the last three years. The confusion was all the most accentuated, as the Government had clarified regarding the exemption, giving the industry the feeling that the issue has been resolved.

The sources said members of the Indian National Shipowners Association (INSA) quickly went into a huddle on October 31. The INSA meeting, while directing the shipping companies to reply to the summons separately, decided to take up the issue once again with the Finance Ministry through the Shipping Ministry. INSA has also decided to take legal opinion and prepare a joint clarification to the summons slapped on its member companies, said the sources.

Ever since the shipping industry was brought under the new service tax net, INSA had taken up the issue through the Shipping Ministry. INSA's stance is that ships, in their routine operations, employed port services, repairs and dry-docking at foreign ports. "Bringing such services under the tax net is unheard of. The services have to be necessarily employed when ships touch foreign ports — these are part of the overall operations of the industry," an INSA representative said. However, after the Ministry took up the issue with the Finance Ministry, the Government issued a clarification that these "reverse services" would be exempted from the service tax net.

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