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2021 (2) TMI 84 - HC - Service TaxInterpretation of statute - whether determination of service tax by the Central Excise Officer, is necessary before making a demand under Section 73A(3) of the Finance Act, 1994? - HELD THAT - From perusal of Section 73A(5) of the Act, it is evident that the amount paid to the credit of the Central Government under sub-section (1) or sub-section (2) or sub-section (4) shall be adjusted against the service tax payable by the person on finalization of assessment or any other proceedings for determination of service tax relating to the taxable service deferred to in sub-section (1). Thus, from perusal of Section 73A(5) of the Act, it is evident that the assessment must precede the demand. After taking note of the provisions of Section 73 of the Act, the learned Single Judge of this Court has held that the power to create a demand under Section 87 of the Act can be exercised only after adjudication namely on assessment of the amount - The aforesaid view has been upheld by the Division bench of this Court in the case of ' UNION OF INDIA VERSUS MRS. PRASHANTHI 2016 (7) TMI 131 - KARNATAKA HIGH COURT . The substantial question of law framed by this Court is answered in favour of the assessee and against the revenue - Appeal dismissed.
Issues:
1. Whether determination of service tax by the Central Excise Officer is necessary before making a demand under Section 73A(3) of the Finance Act, 1994? Analysis: Issue 1: The appeal under Section 35G of the Central Excise Act, 1944 was filed by the revenue, challenging the decision related to the determination of service tax by the Central Excise Officer before making a demand under Section 73A(3) of the Finance Act, 1994. The assessee, engaged in construction activities, did not collect service tax on residential apartments developed between 2006-2009. An escrow account was maintained for amounts collected from buyers to settle any potential service tax liability. The Adjudicating Authority directed the collection kept in the escrow account, along with interest and penalty, as service tax. The Tribunal held that the Commissioner should have determined the amount before raising a demand under Section 73A(3) of the Act. The revenue appealed against this decision. The revenue contended that the assessee was liable to pay service tax as per the agreement with the buyers and that the collected amount should have been remitted to the State Government. On the other hand, the assessee cited clarifications by the Central Board of Excise and Customs exempting developers from service tax before 01.07.2010. They argued that the completion certificate was obtained before the demand was raised, as required by Section 73A(5). They also referred to previous court decisions supporting their position. The Court analyzed Section 73A(5) of the Act, stating that the assessment must precede the demand for service tax. Referring to Section 73, the Court held that a demand can only be made after assessment. Previous court decisions supported this interpretation. Consequently, the Court answered the substantial question of law in favor of the assessee, leading to the dismissal of the revenue's appeal. The judgment emphasized the necessity of determining service tax before making a demand under Section 73A(3) of the Finance Act, 1994. In conclusion, the Court's detailed analysis and interpretation of relevant legal provisions and precedents led to the dismissal of the revenue's appeal, affirming the importance of proper assessment before demanding service tax under the specified provisions of the Act.
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