2017 (12) TMI 1672 - Commission - Service Tax

Reduced rate of interest - Non-payment of service tax - Real Estate Agent s service - allegation based on investigation initiated by the officers of DGCEI, Hyderabad Zonal Unit - Held that - The applicant in his settlement application admitted the entire service tax liability of ₹ 22,53,449/- and paid the same along with interest amounting to ₹ 13,02,901/- - With regard to payment of interest, the Bench observes that the department has not accepted the applicant s plea for reduced rate of interest on the ground that out of the 5 years period (2011-12 to 2015-16) covered in the notice, applicant s taxable turnover exceeded rupees sixty lakhs during the year 2013-14, thus making him ineligible for reduced rate of interest at 3% for determination of interest liability. The Bench observes that in the Finance Act, 2011, the rate of interest leviable under Section 75 of the Finance Act, 1994 for delayed payment of service tax was increased from 13% to 18%. However vide proviso to Section 75 with effect from 8-4-2011, relief in the form of reduction of 3% interest rate was provided to small service providers whose value of taxable services did not exceed 60 lakh rupees in a financial year - The Bench observes that the wordings does not exceed sixty lakh rupees during any financial year clearly conveys the meaning that the taxable turnover of a service provider should not exceed 60 lakh rupees in all the financial years covered in the notice to be eligible for the benefit of reduced interest rate. Hence the Bench is in agreement with the department s stand on the issue and holds that the applicant is not entitled to the benefit of reduced rate of interest inasmuch as out of the impugned period covered in the notice i.e. 2011-12 to 2015-16, applicant s turnover had exceeded 60 lakh rupees during the financial year 2013-14. The actual interest liability on the service tax works out to ₹ 13,02,901/- which was also admitted and paid by the applicant at the time of filing Settlement Application. Hence, the Bench holds that the claim for reduced rate of interest made subsequently vide their letter dated 16-6-2017 is without any merits and therefore rejects the same. Penalty - Held that - The Bench notes that the applicant had not taken Service Tax Registration and was also not filing ST3 returns during the relevant period and they filed the statutory returns subsequently along with late fee. Non-registration and non-filing of the ST3 returns by the applicant would lead to the conclusion that they have concealed the liability before the assessing authorities and the Bench holds that the applicant is liable for penalty - The Bench also notes that the applicant has made a true and full disclosure of their liability - considering the co-operation extended during the course of proceedings, the Bench is inclined to grant partial immunity from penalty to the applicant. Prosecution - Held that - The Bench considers it a fit case for grant of immunity from prosecution to the applicant.

Issues Involved:
1. Non-payment of service tax by the applicant.
2. Eligibility for reduced rate of interest under Section 75 of the Finance Act, 1994.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
4. Immunity from prosecution.

Issue-wise Detailed Analysis:

1. Non-payment of Service Tax:
The applicant, working as a Real Estate Agent for M/s. Subhagruha Projects (India) Pvt. Ltd., did not pay service tax on commissions received between 2011-12 and 2015-16. The investigation by DGCEI revealed that the applicant received a total commission of ?2,11,09,789 but failed to pay the corresponding service tax of ?22,53,449. The applicant admitted the liability, registered for service tax, and paid ?5,00,999 towards the liability before the issuance of the Show Cause Notice (SCN).

2. Eligibility for Reduced Rate of Interest:
The applicant claimed eligibility for a reduced interest rate under the proviso to Section 75 of the Finance Act, 1994, arguing that their taxable turnover did not exceed ?60 lakh in four out of the five years covered by the SCN. However, the jurisdictional Commissioner contended that since the applicant's turnover exceeded ?60 lakh in the financial year 2013-14, they were not eligible for the reduced rate. The Bench agreed with the department, stating the proviso requires the turnover not to exceed ?60 lakh in any of the financial years covered by the notice. Therefore, the applicant's interest liability was confirmed at ?13,02,901, which had already been paid.

3. Imposition of Penalties:
The applicant argued that non-payment of service tax was due to ignorance and lack of awareness, and sought waiver of penalties. The jurisdictional Commissioner maintained that the applicant was liable for penalties as the evasion was detected only due to the investigation by DGCEI. The Bench noted the applicant's failure to register for service tax and file returns, concluding that the applicant concealed the liability. However, considering the applicant's cooperation and full disclosure, the Bench imposed a reduced penalty of ?60,000, granting partial immunity from further penalties.

4. Immunity from Prosecution:
Given the applicant's cooperation and the full disclosure made during the proceedings, the Bench granted immunity from prosecution under the Finance Act, 1994.

Order:
The Bench settled the case with the following terms:
1. Service tax liability settled at ?22,53,449, already paid by the applicant.
2. Interest liability settled at ?13,02,901, already paid by the applicant.
3. Penalty of ?60,000 to be paid within 30 days.
4. Immunity from prosecution granted, subject to compliance with the payment terms.

The immunities are granted under Section 32K of the Central Excise Act, 1944, applicable to service tax matters via Section 83 of the Finance Act, 1994. Failure to comply with the payment terms would result in the withdrawal of immunities and imposition of penalties equal to the tax amount settled.

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