2019 (2) TMI 315 - HC - Service Tax

Levy of penalty u/s 78 - Short payment of service tax or not? - the party did not get themeselvwes registered under the category of real estate agent services, did not file ST-3 returns and also did not pay the service tax to the Government Exchequer collected by them from their clients from 2006-2007 - Held that - This Court finds that the Tribunal has recorded a finding of fact that the returns were filed and due taxes have been paid. In case of delayed deposit of tax, interest has also been paid by the respondent-assessee - in view of Master Circular No. 97/8/2007 dated 23.08.2007 read with Circular/Instruction No. F- 137/167/2006-CX .4 dated 03.10.2007, once the taxes have been paid, along with interest, the entire proceedings under the Finance Act, 1994 are concluded. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of tax liability for real estate agent services.
2. Benefit of CENVAT credit and calculation of tax amount.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
4. Non-disclosure of tax liabilities in ST-3 returns.

Analysis:
1. The case involved a dispute regarding the tax liability of the respondent for real estate agent services. The respondent was registered for providing construction services and had been paying taxes accordingly. However, the Revenue alleged that the respondent had not registered or paid service tax for real estate agent services from 2006-07 to September 2011. The Tribunal found that there was no evidence of short payment of service tax or underreporting in the returns filed by the respondent. The Tribunal remanded the matter for reconciliation of tax paid and verification of the amount admissible.

2. The issue of CENVAT credit and tax calculation amounting to ?22,50,072 was raised. The Tribunal was criticized for allowing this benefit without delving into the facts of the case. However, the Tribunal's decision was upheld as it found no discrepancies in the tax payments made by the respondent. The Tribunal's order was considered legally sound and not perverse.

3. The imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 was contested. The Commissioner had confirmed a demand of ?1,65,39,989 and imposed penalties equal to that amount. The Tribunal, on appeal, set aside these penalties, stating that there was no case of short payment of service tax. The Court upheld the Tribunal's decision, emphasizing that once taxes were paid along with interest, proceedings under the Finance Act were concluded.

4. The non-disclosure of tax liabilities in ST-3 returns was also a point of contention. The Tribunal found that the returns were filed, taxes were paid, and interest was also paid in case of delayed deposits. The Court noted that as per relevant circulars, once taxes were paid with interest, the legal proceedings under the Finance Act were considered complete. Consequently, the appeal was dismissed, and the questions of law were decided in favor of the respondent, against the Revenue.