9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (12) TMI 36 - HC - Service TaxChallenge to the show cause notice invoking extended period of limitation - Renting of immovable property - Suppression of facts - Intention to evade tax - failure to comply with the requirements of the statutory provisions of the Finance Act, 1994 - Audit of accounts by CAG of non-government company which is not operated out of the funds of the Union of India or any State Government or any Union territory or any entity owned and/or financed by them - Held that - there is no provision in Chapter V of the Finance Act, 1994, or for that matter in the CAG Act which empowers the CAG to audit the accounts of an assessee which is a non-government company, not in receipt of aid or assistance from any Government or Government entity. Sub-section (2) of Section 94 also does not empower the Central Government to frame rules for audit of the accounts of an assessee by any audit team under the Comptroller and Auditor-General of India. There can be no doubt that statutory rules, framed in exercise of power conferred by statute cannot introduce something not contemplated in the statute, from which it derives its rule making power. On a harmonious reading of Rule 5A of the Service Tax Rules with the provisions of Chapter V of the Finance Act, 1994, as amended, it may be deduced that any officer authorized by the Commissioner would have to be interpreted to include the members of an audit team, an auditor or an accountant authorized by the Commissioner, and they would all have access to any premises registered under the Rules, for the purpose of carrying out scrutiny, verification and checks as might be necessary, including auditing of accounts, to safeguard the interest of Revenue. The obligation to provide records to the audit party deputed by the Comptroller and Auditor-General is to be construed as an obligation to provide documents and records, when those documents and records are necessary for audit in accordance with law, subject to the provision of the CAG Act, for example, audit of the receipts of the Government meant for deposit in the Consolidated Fund of India or, may be, an audit on the request of the Governor or the President as indicated above. Maintainability of writ petition - Held that - It is well settled that existence of an alternative remedy is not in itself a bar to entertaining a writ petition. A writ petition can certainly be entertained when a notice is impugned as without jurisdiction. Extended period of limitation - Held that - Finance Act, 2011, whereby the provisions of the Finance Act, 1994, relating to the service of renting of immovable property have been amended, does not contain any provision which enables the Service Tax Authorities to make any demand beyond the period of limitation prescribed in Section 73(1) of the Finance Act, 1994. Commissioner proceeded on the basis that there had been contravention, as a result of which, some tax payable had not been paid. The Commissioner of Service Tax did not address the issues, which were required to be addressed, for issuing a notice by invoking the extended period of limitation. - Demand raised by issuance of the impugned show cause notice has been pre-determined. When a demand is pre-determined the same does not remain in the realm of a show cause notice as held by the Supreme Court in Siemens Ltd. v. State of Maharashtra reported in 2006 (12) TMI 203 - SUPREME COURT OF INDIA . When a notice is issued in support of transactions spread over a period of time and it is found that the extended period of invocation has been invoked, the notice cannot be treated as within limitation for some of the same transactions, once it is found that the extended period of limitation is not invocable - The entire claim except at best for, may be, four receipts is barred by limitation. It is well-settled inter alia by the decisions of the Supreme Court in M/s. Raza Textiles Ltd. (1972 (9) TMI 15 - SUPREME Court), Calcutta Discount Company Ltd. (1960 (11) TMI 8 - SUPREME Court) and Shrisht Dhawan (1991 (12) TMI 271 - SUPREME COURT) that an authority cannot invoke jurisdiction to exercise power by deciding jurisdictional facts wrongly. In exercise of the power of judicial review under Article 226 of the Constitution of India, this Court might examine the existence and/or correctness of the jurisdictional facts on the basis of which jurisdiction to exercise power is invoked. Conditions precedent for exercise of jurisdiction to invoke the extended period of limitation were wholly absent. The Commissioner has not properly and independently applied his mind to the question of whether the conditions for invoking the extended period of limitation existed, but has acted mechanically, swayed by the report of the CERA team, which in itself appears to be illegal and unsustainable. The Commissioner of Service Tax has not properly applied his mind to the issues required to be addressed for invoking the extended period of limitation. The impugned show cause notice has been issued by wrongful invocation of jurisdiction. - Decided in favour of assessee.
Issues Involved:
1. Validity of the show cause notice-cum-demand for service tax. 2. Applicability of Section 73 of the Finance Act, 1994 regarding the recovery of service tax. 3. Invocation of the extended period of limitation. 4. Jurisdiction and authority of the CERA Audit Team. 5. Whether the extended period of limitation was justifiably invoked. 6. The distinction between rent and premium/salami. 7. The jurisdiction of the High Court to entertain the writ petition despite the existence of an alternative remedy. Detailed Analysis: 1. Validity of the Show Cause Notice-Cum-Demand: The writ petition challenges the show cause notice-cum-demand dated 18th April 2012, alleging that service tax amounting to Rs. 9,53,69,284/- was due for the service of renting immovable property for the periods 2007-2008 to 2010-2011. The petitioner argues that the notice is barred by limitation and therefore without jurisdiction. 2. Applicability of Section 73 of the Finance Act, 1994: Section 73 of the Finance Act, 1994 allows for the recovery of service tax not levied or paid within one year from the relevant date. The period of limitation is extended to five years in cases involving fraud, collusion, willful misstatement, suppression of facts, or contravention of any provisions with intent to evade service tax. 3. Invocation of the Extended Period of Limitation: The notice was issued on 18th April 2012, invoking the extended period of limitation for financial years 2007-2008 to 2010-2011. The court examined whether the conditions for invoking the extended period existed. The reasons for invoking the extended period are stated in Paragraphs 9 and 10 of the show cause notice, alleging suppression of facts with the intent to evade payment of service tax. 4. Jurisdiction and Authority of the CERA Audit Team: The show cause notice was issued based on observations by the CERA Audit Team. The court held that the CERA Audit Team of the Comptroller and Auditor General of India had no power or jurisdiction to inspect the records of the petitioner company. The duties and powers of the Comptroller and Auditor-General are circumscribed by Article 149 of the Constitution of India and the CAG Act, which do not empower the CAG to audit the accounts of non-government companies not financed by the government. 5. Whether the Extended Period of Limitation was Justifiably Invoked: The court found that the reasons for invoking the extended period of limitation were vague and devoid of material particulars. The petitioner had complied with a notice issued by the Commissioner, Service Tax, in 2009, providing the requisite information. The court held that the extended period of limitation could not be invoked after almost three years without questioning the petitioner's bona fides earlier. 6. The Distinction Between Rent and Premium/Salami: The court referred to judgments distinguishing between rent and premium/salami. The Supreme Court in Commissioner of Income Tax v. Panbari Tea Co. Ltd. held that premium or salami is the price paid for the transfer of a right to enjoy the property and is a capital income, whereas rent is a revenue receipt. This distinction might have led the petitioner to believe that premium was not liable to service tax. 7. Jurisdiction of the High Court to Entertain the Writ Petition: The court held that the existence of an alternative remedy does not bar entertaining a writ petition when a notice is impugned as without jurisdiction. The question of limitation is a question of jurisdiction, and the Commissioner has no authority to issue a notice after the period prescribed in the Finance Act, 1994. The court found that the Commissioner had not properly applied his mind to the conditions for invoking the extended period of limitation and had acted mechanically, swayed by the CERA report. Conclusion: The court allowed the writ application, setting aside and quashing the impugned show cause notice, holding that the conditions for invoking the extended period of limitation were absent, and the notice was issued without proper jurisdiction.
|
