2014 (1) TMI 1760 - Commission - Service Tax

Whether the applicant is eligible for approaching the Settlement Commission for settlement of the case in the circumstances where no return was filed for the period in dispute and there was retrospective legislation regarding recovery of service tax - Held that - the pre-requisite conditions have been laid down under Section 32E of the Central Excise Act, 1944, which provides that no application for settlement shall be made unless the applicant has filed returns showing production, clearance and Central Excise duty in the prescribed manner . The above provisions have been made applicable to service tax matters under Section 83 of the Finance Act, 1994. Filing of returns is a pre-requisite for approaching the Settlement Commission. No return has been filed by the applicant for the period in question, which fact has also been mentioned in its application while coming before the Settlement Commission. Therefore, filing of returns is a pre-requisite and there is no provision for filing of returns in a consolidated manner. Service tax returns have not been filed for the period in dispute in the present case of M/s. Kaysons Enterprises Private Limited, either before the 8th day of May, 2010, that is, the date of the retrospective amendment made vide Section 77 of the Finance Act, 2010, or afterwards. Shri Jagjit Singh, Director in his statement dated 10-1-2012 has stated that he would file the return for the period 2007-08 up to March, 2011 very shortly. However, before coming to the Settlement Commission, he has not filed the returns, which is admitted in the application for settlement. Under clause (a) of proviso to Section 32E(1) of the Central Excise Act, 1944, no application can be made unless the applicant has filed returns. Considering filing of returns as a requirement to be fulfilled by the applicant applying for settlement and which requirement has not been fulfilled in this case, the Bench finds that the applicant is not eligible to approach the Settlement Commission and accordingly the application is liable to rejection. - Decided against the applicant

Summary

Issues Involved:
1. Non-payment of service tax on renting of immovable property.
2. Failure to file service tax returns.
3. Retrospective amendment of service tax law.
4. Eligibility for settlement application.
5. Imposition of penalties and interest.

Issue-wise Detailed Analysis:

1. Non-payment of Service Tax on Renting of Immovable Property:
The applicant, M/s. Kaysons Enterprises Pvt. Ltd., rented their premises to various tenants but did not pay service tax under "Renting of immovable property service" as per Section 65(105)(zzzz) of the Finance Act, 1994. The show cause notice (SCN) alleged a service tax liability of Rs. 17,38,907 due to wilful suppression of facts and intent to evade tax. The applicant only deposited Rs. 20,08,817 after the Directorate General of Central Excise Intelligence (DGCEI) initiated investigations.

2. Failure to File Service Tax Returns:
The applicant did not file ST-3 returns from 2007-08 to 2010-11. The SCN highlighted this failure and the applicant's subsequent admission that returns were not filed for the disputed period. The applicant later filed returns for the half-year periods ending September 2011 and March 2012, but these were submitted after the investigation began.

3. Retrospective Amendment of Service Tax Law:
The applicant argued that they did not collect or pay service tax initially due to the Delhi High Court's decision in Home Solutions Retail India Limited, which declared the levy ultra vires. However, the Finance Act, 2010 retrospectively validated the levy from 1-6-2007. The applicant contended that penalties should not be imposed as the liability was retrospectively created.

4. Eligibility for Settlement Application:
The Settlement Commission examined whether the applicant fulfilled the eligibility criteria under Section 32E of the Central Excise Act, 1944, which requires the filing of returns. The applicant admitted to not filing returns for the period in dispute. The Commission cited precedents, including the case of Emerson Electric Company (India) Private Limited, which held that consolidated returns do not satisfy the requirement. The Hon'ble Delhi High Court in ICON Industries also emphasized that filing returns is a prerequisite for settlement applications.

5. Imposition of Penalties and Interest:
The applicant's counsel argued that penalties should not be imposed for acts or omissions during the period when the service tax liability was retrospectively created. They referenced Supreme Court judgments in Rama Vision Limited and Star India Private Limited, which supported the view that penalties cannot be imposed retrospectively. However, the Commission noted that these arguments were secondary to the primary issue of eligibility for settlement.

Conclusion:
The Settlement Commission concluded that the applicant did not meet the eligibility criteria for settlement due to the failure to file service tax returns for the disputed period. The application was therefore rejected. The Commission emphasized that filing returns is a mandatory prerequisite under Section 32E of the Central Excise Act, 1944, and the applicant's failure to comply with this requirement rendered them ineligible for settlement.

Order:
The application for settlement was rejected, and all concerned parties were informed accordingly.