Custom, Excise & Service Tax Tribunal
M/S D.S. Narayana & Company Pvt. Ltd vs Cc &Ce & Visakhapatnam-Ii on 11 April, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. ST/2960/2011 (Arising out of Order-in-Appeal No. 14/2011 (V-II) ST dated 07.10.2011 passed by CCE, C & ST (Appeals), Visakkhapatnam M/s D.S. Narayana & Company Pvt. Ltd ..Appellant(s) Vs. CC &CE & Visakhapatnam-II ..Respondent(s)
Appearance Shri G. Vijaya Balan, for the Appellant.
Shri Nagaraj Naik, Deputy Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of hearing: 23/03/2017 Date of decision: 23/03/2017 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.]
1. The appeal is filed against the order passed by Commissioner (Appeals) who upheld the interest and penalties imposed by the adjudicating authority.
2. The appellant is registered under category of Renting of Immovable Property Service. They did not discharge their service tax liability on the said services for the period from 1.04.2008 to 30.09.2008 and 1.10.2008 to 31.03.2009. Appellants were issued Show Cause Notice on 15.02.2010 proposing to recover an amount of Rs. 1,90,676/- towards service tax on Renting of Immovable Property Service for the above said period along with interest and also proposing to impose penalties. After due process of law, the original authority confirmed the demand along with interest and also imposed penalty under section 76 of the Finance Act, 1994, besides imposing Rs. 4000/- as late fee for delay of filing of ST 3 Returns. Against this order, the appellant filed appeal before Commissioner (Appeal) and vide order impugned herein, the Commissioner (Appeals) upheld the same. Hence this appeal.
3. On behalf of the appellant, the Ld. Counsel Shri Vijaya Balan submitted that the appellant did not contest the service tax liability before the Commissioner (Appeals). The contest was confined to the demand of interest and the penalties imposed. The Commissioner (Appeals) did not consider the contentions put forward by appellant and upheld the demand of interest and penalties.
4. It is submitted by him, that levy of service tax was introduced for the first time by Finance Act, 2007. The amendment said that in Section 65 of the Finance Act, 1994 in clause (105), the following sub-clause (zzzz) shall be inserted. As per this insertion taxable service means any service provided or to be provided to any person by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce. This was later amended by Finance Act, 2010 to read thus:
In sub-clause (zzzz) the following shall be substituted and shall be deemed to have been substituted with effect from 1st day of July 2007 namely to any person by any other person by renting of immovable property or any other service in relation to such renting for use in the course of or, for furtherance of business or commerce.
Thus the Finance Bill, 2010 made the services under Renting of Immovable Property Services taxable retrospectively with effect from 01.06.2007.
5. He explained that the above amendment was brought forth on account of judgment of the Honble High Court of Delhi in the case Home Solutions Retail India V/s Union of India 2009 (14 STR 443 Delhi). That the appellant did not collect the service tax from the tenants as the tenants refused to pay service tax due to the above stated judgment. For this reason appellants failed to discharge the liability of service tax to the department. However they later paid the service tax along with interest. The interest amount for the period from 08.05.2010 onwards was calculated and paid by appellant. That appellant is not liable to pay interest prior to this date and also not liable for penalty since the service were made taxable with effect from 01.07.2007 retrospectively. The Finance Bill was introduced on 26.02.2010 and it received assent of the President on 08.05.2010. The appellant paid service tax of Rs. 1,90,676 demanded on said services from 01.04.2008 to 31.03.2009 as raised in the Show Cause Notice dated 15.02.2010. The interest due from 08.05.2010 to 27.01.2012 to the tune of Rs. 47,321/- was paid along with Service Tax on 28.01.2012. Therefore the Appellant has discharged the interest from date on which the Finance Bill, 2010, received the assent of the President (08.05.2010). He relied upon the judgment of Honble Supreme Court in the cause of STAR INDIA (Pvt) LIMITED V/s CCE Mumbai (Goa) 2006 (1) STR 73 (SC). That in the said judgment, in a similar situation, where, the Broad Casting Service was made taxable retrospectively, the Honble Apex Court held that no interest was leviable or penalty can be imposed in such cases of retrospective levy of tax. The Ld. Counsel has referred to the validation clause contained in the Finance Bill 2010. It is submitted by him that by such validation clause, it stated that no person shall be punishable for an act or omission, as an offence which would not have been so punishable had the amendment not come into force. That therefore the penalty imposed is unsustainable. The Ld. Counsel also relied upon the judgment in the case of the CCE Indore V/s Premium Industries Ltd 2009(248) ELT 883 Tribunal Delhi] and Asean Aromatics Pvt. Ltd., Vs. CCE, Chennai [2008 (232) ELT 514 (Tri. Chennai)] and BOC India Ltd., V/s CCE, Bangalore, [2004 (173) ELT 140 (Tri. Kolkata)]. He argued that the demand of interest after 08.05.2010 and the penalty imposed under section 76 as well as late fee imposed under Section 70 are against law.
7. On behalf of the department, the Ld. AR Sh. Nagraj Naik, reiterated the findings in the impugned order. He submitted that the appellant has not paid the service tax during the period covered in the Show Cause Notice. The service tax along with interest was paid only on 28.01.2012 after passing of the adjudication order. The appellant did not pay interest for the entire demand. He has paid interest only for the period from 08.05.2010 to 27.01.2012. The appellant is liable to pay interest for the period prior to 08.05.2010 also. The service of Renting of Immovable Property Services became taxable with effect from 01.06.2007. The amendment brought forth by Finance Bill 2010 was only clarificatory. That therefore it cannot be said, that these services have been made taxable retrospectively. Since the appellant has not paid service tax within due date he is liable to pay the interest on the entire demand till payment. Further the penalty under section 76 of the Finance Act is attracted as there is short payment of service tax. The late fee under Section 70 is imposed due to delay in filing returns. He submitted that there are no grounds to interefere in the order passed by Commissioner (Appeals)
8. I have heard the submissions made before me. The appellant does not contest the liability of service tax to the tune of Rs. 1,90,676/-. The challenge in the appeal is confined to the demand of interest prior to 08.05.2010 and also on the penalty imposed under section 76 and the late fee imposed under section 70 of the Finance Act, 1994. The services of Renting of Immovable Property services became taxable with retrospective effect pursuant to an amendment brought forth in Finance Act, 2010. The services thus became taxable with effect from 01.06.2007. The Finance Bill received assent of the President on 08.05.2010. The contention of appellant is that when the levy is made retrospectively, the liability to pay the interest starts only when such Bill receives assent of the President and comes into force. That interest cannot be demanded retrospectively. The Ld. Counsel relied upon the judgment in the case of Star India Pvt. Ltd.
9. The Honble Apex Court in the case of Star India Pvt. Ltd., held that interest need not be paid for the liability it is created retrospectively. The relevant para is quoted as under:
6. Factually, this appears to be incorrect. From the decision of the Tribunal it is clear that the Tribunal had in fact held that the appellant was liable by reason of the amendment to the term broadcasting effected by the Finance Act, 2002.
7. In any event, it is clear from the language of the validation clause, as quoted by us earlier, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well established that while it is permissible for t he legislature to retrospectively legislate, such retrospectively is normally not permissible to create an offence retrospectively. There were clearly judgments, decrees or orders of courts and Tribunals or other authorities, which required to be neutralized by the Validation Clause. We can only assume that judgments, decree or orders etc. had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the Validation Section which says that no act or acts on the part of any person shall be punishable as an offence which would have been so punishable if the Section had not come into force.
8. The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect.
9. It is also to be noted that the Tribunal itself deleted the imposition of penalty imposed by the Commissioner (Appeals) on the appellants on this ground.
10. Besides, if the liability has been created under the amended section by virtue of sub-section (2) of Section 148 of the Finance Act, 2002, it must be given effect to wholly. The section expressly makes the assessee liable under the amended provision to pay the tax within the period of 30 days from the date of the Presidential Assent to the Finance Bill, 2002. It is admitted that the Finance Bill, 2002 was assented to on 11.05.2002 by the President. In the circumstances, the appellant was entitled to a period of thirty days thereafter to make payment of the tax. Needless to say, if it did not make payment within thirty days from the 11.05.2002, it would be liable to pay interest at the rate specified after that date.
11. The appeals are, accordingly, allowed but without any order as to costs.
10. Similar issue was discussed in the case BOC India Ltd. V/s CCE, Bangalore (supra). The relevant portion is reproduced as under:
4. The question is whether the interest was imposable in the instant case or if it, from which date. In Laghu Udyog Bharati & Others v. Union of India reported in 1999 (112) E.L.T 365 (S.C) = 1999 (33) RLT 911 (SC) struck down the levy of service tax and declared it ultra vires. Subsequently, govt. reintroduced the levy with retrospective effect for the period 16.11.1997 to 1st June, 1998 in the Finance Act, 2000 which received the assent of the President in May, 2000. From above it is clear that service tax was not applicable for the period from 16.11.1997 to 1st June, 1998. It was made applicable from May, 2000 with retrospective date from 16th Nov., 97. Any penal provision cannot be made effective from retrospective date. They can only be prospective. They liability to pay the tax arises against the appellant after revalidation of Section 117 of the Finance Act, 2000.
5. In present case also the duty was made effective from May, 2000 for the period 16.11.97 to 1st June, 1998. Prior to it, it was declared ultra vires by the Honble Apex Court. Consequently, the appellant was not under an obligation to discharge the duty liability pertaining to period 16.11.97 to 1st June, 98. The contention of the learned Commissioner (Appeals) is not acceptable. Learned Commissioner of Appeals has mentioned in his impugned order the normal course for the appellant would have been that they should have paid the tax, followed the procedure and claim refund like others. The levy of tax was not in force from 16.11.1997 to 01.06.98. It is futile or a farce fallacy to deposit a tax and get it refunded. From above discussion it is clear that appellant was under obligation to discharge the Tax liability from 16.11.97 to 1st June, 98 only on May, 2000 and consequently he was not liable to pay interest prior to May, 2000 i.e. the date on which the duty was payable. In the instant case the interest has been realized from 16.11.97 which is contrary to law. The appellant is liable to pay interest from May, 2000 onwards. Accordingly I partially allow the appeal with the direction that the appellant will be liable to pay interest from May, 2000. Consequently, I allow the appeal in above terms with consequential relief to appellant.
11. In Asean Aromatics Pvt. Ltd., (supra). The Tribunal observed as under:
2. In the present appeal, the assessee has challenged the demand of interest and the imposition of penalties. The Ld. Counsel has supported the challenge against the penalties by relying on Explanation to Section 132 of the Finance Act, 2001. He has relied on the decision of the apex court in Star India Pvt. Ltd. V/s Commissioner, 2006 (1) S.T.R 73 (S.C.) in support of the assessees challenge against the levy of interest. We have heard the Ld. JCDR also.
3. After considering the submissions, we note that the erstwhile Rule 173GG had, apart from providing the facility of monthly payment of duty, also provided for levy of interest from, and imposition of penalty on, defaulters of duty. The provision was omitted on 1-04-2000 without any saving clause for any action already initiated under the provision against any manufacturer of excisable goods. The SCN, in this case, was issued subsequendy on 01-08-2000, but the same would not amount to action already initiated. While the department was prosecuting action pursuant to the SCN against the assessee, the Finance Act, 2001 came into force on 11-05-2000 without any saving clause for any action already initiated under the provision against any manufacturer of excisable goods. The SCN, in this case, was issued subsequendy on 01-08-2000, but the same would not amount to action already initiated. While the department was prosecuting action pursuant to the SCN against the assessee, the Finance Act, 2001 came into force on 11-05-2001. This Act introduced Section 38A in the Central Excise Act providing for protection, with retrospective effect, for actions taken by the department under Rules, Notifications, Orders etc. amended, superseded, rescinded, repealed etc. Thus the SCN dt. 1-08-2000 issued under the omitted Rule 173GG became operative by virtue of the retrospective operation of the provisions of Section 38A of the Act. Section 132 of the Finance Act revalidated actions already taken under omitted Rules. However, the Explanation to this Section protected persons targeted by such actions, from penalty. This provision declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if the Section had not come into force. The appellants are entitled to the benefit of this Explanation to Section 132 of the Finance Act, 2001 and, accordingly, the penalties imposed on them are vacated.
4. As regards interest, reliance has been placed on the apex courts judgment, which reads as under:
The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created respectively could not entail the punishment of payment of interest with retrospective effect. In view of the above decision, interest on duty cannot be recovered from the respondents as liability to pay interest is in the nature of a quasi-punishment. In other words, by virtue of the apex courts ruling, the benefit of Explanation to Section 132 of the Finance Act, 2001 gets extended to interest also. The impugned order gets set aside and this appeal is allowed.
12. In this regard the validation clause in Finance Bill, 2010 is note worthy and reproduced as under:
76. Any action taken or anything done or omitted to be done or purported to have been taken or done or omitted to be done under sub-clause (zzzz) of clause (105) of section 65 of the Finance Act, 1994, at any time during the period commencing on and from the 1st day of June, 2007 and ending with the day, the Finance Bill, 2010 receives the assent of the President, shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done or omitted to be done as if the amendment made in sub-clause (zzzz) of clause (105) of section 65, by sub-item (i) of item (h) of sub-clause (5) of clause (A) of section 75 of the Finance Act, 2010 had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority,
a) any action taken or anything done or omitted to be taken or done in relation to the levy and collection of service tax during the period on the taxable service of renting of immovable property, shall be deemed to be and deemed always to have been, as validly taken or done or omitted to be done as if the said amendment had been in force at all material times;
b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for the levy and collection of such service tax and no enforcement shall be made by any court of any decree or order relating to such action taken or anything done or omitted to be done as if the said amendment had been in force at all material times;
c) recovery shall be made of all such amounts of service tax, interest or penalty or fine or other charges which may not have been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, as if the said amendment had been in force at all material times.
Explanation For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this amendment not come into force.
13. It is seen stated in the above clause, that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this amendment not come into force. On the basis of the judgment rendered by the Honble High Court of Delhi in Home Solutions Retail India Ltd. (supra) during the relevant period, no demand of service tax of renting of immovable property could be made in the abscence of the amendment. From the above, it is clear that the appellant is not liable to pay interest prior to 08.05.2010 and also the penalty. The appellant has paid the interest on the entire demand after 08.05.2010 till payment. Following the judgments cited above I hold that the demand of interest and the penalty imposed under Section 76 is unsustainable. However, I do not interfere with the late fee imposed under Section 70 of the Finance Act, 1994. The impugned order is modified to the extent of setting aside the demand of interest after 08.05.2010 and the penalty imposed under Section 76 of Finance Act, 1994. Appeal is partly allowed in above terms.
(Order pronounced on in open court) (SULEKHA BEEVI C.S.) MEMBER(JUDICIAL) swapna.
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