2013 (12) TMI 1018 - AT - Service Tax

Waiver of pre-deposit of interest - Demand of interest on the amount of service tax - Held that - applicants received certain amount from the flat owners during the year 2006-08 on the ground that in case there is any tax liability the same is to be paid from the security received from the flat owners. Service tax on the amount received by the applicant was paid in the year 2011. In these circumstances, we find that the applicants retained the amount in question received as deposit during 2006-08 till 2011 and earned interest on such amount - even after the Board s clarification in the year 2009 the applicants retained the amount and not returned the same to the flat owners - applicant had not made out a case for waiver of pre-deposit - Stay denied.

Summary

Issues:
Waiver of pre-deposit of interest on service tax amount.
Applicability of service tax on builders for construction of residential flats.
Interpretation of Board's circular on liability of builders for service tax.
Relevance of previous tribunal decisions on similar cases.
Retention of amounts by builders and liability to pay interest.

Analysis:
The case involved an application for waiver of pre-deposit of interest on a service tax amount of Rs.23,88,485. The applicants, who were builders engaged in constructing residential flats, collected security amounts from flat owners during 2006-08. They paid the service tax of Rs.50,27,000 in 2011 after retaining the collected amounts. The Revenue demanded interest on the delayed payment. The applicants argued that they were not liable to pay service tax during the disputed period based on a Board's circular and a previous tribunal decision. However, the Revenue contended that the applicants retained the collected amounts without returning interest to flat owners or paying it to the Revenue.

The Tribunal noted that the applicants retained the collected amounts until 2011 and earned interest on them. They compared the present case with a previous decision where the assessee had returned the collected amounts with interest to flat owners following the Board's clarification in 2009. In that case, the demand for interest was set aside. However, in the present case, the applicants did not return the amounts to flat owners even after the Board's clarification. Therefore, the Tribunal found that the previous decision's ratio was not applicable here. Consequently, the Tribunal held that the applicants had not made a case for waiver of pre-deposit and directed them to deposit Rs.12,00,000 within eight weeks.

In conclusion, the Tribunal denied the waiver of pre-deposit of interest on the service tax amount based on the applicants' retention of collected amounts without returning them to flat owners. The decision emphasized the importance of complying with the Board's clarifications and returning collected amounts in determining the liability for interest on delayed service tax payments.