2009 (12) TMI 42 - HC - Service Tax

Renting of Immovable Property - Issuance of Notices / Show Cause Notices - Board Circular - CBEC (Board) is issuing instructions to its officers throughout the country stating that in view of the filing and pendency of the said Special Leave Petition, the officers should safeguard the Revenue by either pursuing the tax-payers to pay the service tax on renting of immovable property for use in the course of furtherance of business or commerce or resorting to means under law to protect the Revenue - Held that - even when the judgment of this Court is challenged by filing the SLO, till date there is no order passed by the Supreme Court staying the operation of that judgment. In these circumstances, the respondent could not instruct their officers to peruse the matter with tax payers calling upon them to pay service tax or to resort to other means under the law to protect the Revenue - Mr. Chandhiok, learned ASG appearing for the Baord, assures that corrective steps shall be taken by issuing further instructions, in supersession of earlier instructions, to the officers not to write such letters demanding the payment of service tax or threatening coercive steps. - On this assurance no further orders are required to be passed in this Writ Petition.

Summary

Issues:
Challenge to the validity of a notification and circular regarding service tax on renting of immovable property for business purposes. Issuance of instructions by the tax department despite a court judgment. Demand for service tax payment and threats of coercive action.

Analysis:
The judgment pertains to the challenge against a notification and circular related to the imposition of service tax on renting of immovable property for business or commerce purposes. The High Court had previously held these amendments to be ultra vires the Finance Act in a judgment dated 18th April, 2009. Despite this, the tax department, respondent No.1, continued to issue instructions to its officers nationwide, directing them to pursue taxpayers for service tax payment or take legal action to protect revenue. The petition highlighted the discrepancy between the court's decision and the department's actions, leading to the issuance of notices demanding compliance with the contentious notification and circular.

In response to the petition, the court noted that the Supreme Court had not granted a stay on the High Court's judgment, rendering it binding and in force. The court observed that the department's instructions to enforce service tax payment based on the pending Special Leave Petition were unjustified. The communications from tax officials clearly indicated a demand for tax payment and threats of consequences for non-compliance, despite the lack of a final decision from the Supreme Court. The court emphasized that until a stay order was issued, the department could not coerce taxpayers into paying the service tax.

During the hearing, the respondent's counsel assured the court that corrective measures would be taken to issue new instructions to officers, superseding the previous directives demanding tax payment and threatening coercive action. The court accepted this assurance, leading to the disposal of the writ petition. The judgment underscores the importance of adherence to legal decisions and the prohibition against enforcing tax payments based on pending appeals without a stay order.