2013 (12) TMI 628 - HC - Service Tax

Demand of service tax - Imposition of equivalent penalty - Held that - When the plea of not realising the charged amount was not raised before the Adjudicating Officer, it was not open to the appellant to raise it for the first time in the appeal - since the BSNL is a Corporation, which is owned and controlled by the Central Government, the CESTAT should have considered the waiver of pre-deposit of penalty as the question raised in view of the amendments in Rule 6 (1) (ii) vide Notification dated 1.3.2011 - Conditional stay granted.

Issues:
1. Correction application for appeal submission.
2. Liability of service tax on the amount charged.
3. Amendment in Rule 6 (1) (ii) of Service Tax Rules.
4. Failure to raise plea of non-realization of charged amount before Adjudicating Officer.
5. Consideration of waiver of pre-deposit of penalty for a government-owned Corporation.

Correction Application for Appeal Submission:
The appellant filed a correction application to prefer the appeal through Telecom District Manager instead of Chief Accounts Officer, which was allowed by the court. The application was supported by an affidavit and a vakalatnama filed by the counsel.

Liability of Service Tax on the Amount Charged:
The CESTAT found that the appellant did not contest the liability of Rs.22,29,549/- as service tax, even though the amount was not received during the relevant period. The court noted that the liability to remit service tax is not contingent on the receipt of the amount by the service provider, as per Section 67 of the Finance Act, 1994.

Amendment in Rule 6 (1) (ii) of Service Tax Rules:
The appellant argued that as per the amendment in Rule 6 (1) (ii), the service is deemed to be provided as per the rules, and the billed amount has to be deposited by a specified date. However, the court observed that this rule came into effect after the period in question, and thus, the assessment related to the period before the amendment.

Failure to Raise Plea of Non-Realization of Charged Amount:
The court noted that the appellant did not raise the plea of non-realization of the charged amount before the Adjudicating Officer. Therefore, it was not permissible for the appellant to raise this plea for the first time in the appeal. The court emphasized that such a plea would need to be considered during the hearing.

Consideration of Waiver of Pre-Deposit of Penalty for a Government-Owned Corporation:
The court highlighted that since the appellant, a government-owned Corporation, was involved, the CESTAT should have considered the waiver of pre-deposit of penalty, especially in light of the debatable nature of the amendments in Rule 6 (1) (ii). As a result, the court partly allowed the appeal, staying the penalty during the appeal's pendency and directing the appellant to deposit the demanded service tax amount within a specified timeframe.

Conclusion:
The court allowed the appeal in part, providing a stay on the penalty and setting aside the order dismissing the appeal, subject to the appellant depositing the entire service tax amount within the prescribed timeline.

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