2015 (4) TMI 970 - HC - Service Tax

Demand of service tax - Jurisdiction error - No service provided - Held that - The authority, after taking note of the submissions of the petitioner, and taking into account the commission received, in para 25 of the order and after verifying the invoices, came to the conclusion that DLF is the customer and the invoices raised by the noticee also confirm that the noticee received commission from the nominees of DLF - Since a finding rendered by the authority cannot be stated that it is a jurisdictional aspect to be interfered by this court and it is based on the facts of the case, the authority has rendered a finding, merely because the petitioner will have to shell out more than 7.5 lakhs, it cannot be a ground to exercise to interfere with under Article 226 of the Constitution of India. Only in rarest of the rare cases, the court will have to interfere with the decision quoted by the petitioner and the relevant portion is reflected in para 8 of the decision of the Apex Court. Since in this case, the decision taken by the respondent cannot be said to be against the provision of law and there is an arbitrary action without sanction of law - Decided against assessee.

Summary

Issues:
Jurisdictional aspect of service tax imposition without service rendered; Non-disclosure of facts leading to service tax evasion; Validity of extended proviso under Section 73(1) of Finance Act, 1994; Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994.

Jurisdictional Aspect of Service Tax Imposition:
The petitioner, a real estate consultancy firm, challenged the imposition of service tax on amounts received and disbursed to third parties, claiming to act as a conduit. The petitioner argued that no service was rendered by them, and the respondent's decision lacked proper consideration of agreements and bank statements. Citing case law, the petitioner contended that service tax imposition without service provided is a jurisdictional issue reviewable under Article 226 of the Constitution.

Non-disclosure and Tax Evasion:
The authority found the petitioner willfully suppressed facts regarding commission receipts for real estate services, leading to evasion of service tax. The authority invoked the extended proviso under Section 73(1) of the Finance Act, 1994, due to deliberate non-disclosure and use of a double invoice system to mislead. The authority confirmed a substantial tax demand based on the suppression of facts and intentional evasion.

Imposition of Penalty and Interest:
The authority imposed penalties under Sections 77 and 78 of the Finance Act, 1994, citing contravention of tax liability provisions and deliberate tax evasion by the petitioner. The authority held the petitioner liable for interest on unpaid service tax, emphasizing the failure to discharge tax obligations and the intentional evasion of tax liabilities.

Validity of Authority's Decision and Dismissal of Writ Petition:
The court dismissed the writ petition challenging the authority's decision, stating that mere financial burden on the petitioner does not warrant interference under Article 226. The court emphasized that interference is justified only in exceptional cases of arbitrary actions without legal sanction. As the authority's decision was not against the law and did not involve arbitrary action, the court found no merit in the petitioner's contentions, leading to the dismissal of the writ petition without costs.

This detailed analysis covers the jurisdictional aspect of service tax imposition, non-disclosure leading to tax evasion, the validity of penalty imposition, and the court's decision to dismiss the writ petition challenging the authority's findings.