2015 (9) TMI 1332 - AT - Service Tax

Waiver of pre deposit - associated enterprises - payment of service tax on the basis of debit / credit entries in the accounts - appellant contended that, the amendment carried out in Section 67 of Finance Act, 1994 cannot be taken to mean that service tax will have to be paid on the amount shown as outstanding from association enterprises - Held that - Court is in full agreement with the order of the Tribunal in 2014 (7) TMI 410 - CESTAT NEW DELHI - Pre deposit waived.

Summary

Issues:
Interpretation of amended Section 67 of the Finance Act, 1994 regarding service tax liability on outstanding amounts from associated enterprises prior to 10/05/2008.

Analysis:
The judgment dealt with the issue of service tax liability on outstanding amounts from associated enterprises before 10/05/2008 following an amendment to Section 67 of the Finance Act. The appellant was subjected to proceedings resulting in a service tax demand of over Rs. 8.98 crores, along with interest and penalty under Section 78. The appellant argued citing a Tribunal decision that service tax should only be payable on amounts debited or credited after 10/05/2008, not on outstanding amounts. The respondent, however, relied on statutory provisions stating that tax should be paid on outstanding amounts as well.

The Tribunal analyzed the submissions and referred to the relevant legal provisions. It discussed the amendment to Section 67 and Rule 6(1) of the Service Tax Rules, 1994, emphasizing the term "associated enterprises" and the definition of "gross amount charged." The Tribunal highlighted that the explanation added to Rule 6(1) could not be given retrospective effect, as clarified in previous judgments. It cited a case where a similar explanation was not treated as retrospective due to widening the tax net, leading to the conclusion that the demand for interest on alleged delay in discharging service tax liability for outstanding amounts was not sustainable.

Consequently, the Tribunal agreed with the precedent decision and allowed the appeal without requiring a pre-deposit. The appeal was scheduled for final hearing based on the established legal interpretation. The judgment provided a detailed analysis of the statutory provisions and case law to determine the service tax liability on outstanding amounts from associated enterprises before the specified amendment date, ensuring a fair and thorough assessment of the legal issues involved.