2023 (4) TMI 964 - HC - Service Tax

Maintainability of fresh proceedings for assessment or recovery of service tax under Chapter-V of the Finance Act - Chapter-V of the Finance Act stands omitted - petitioner contends that the proceedings now initiated by issuance of the impugned SCN and the impugned letters are not saved under Section 174 of the CGST Act - HELD THAT - It is apparent from a plain reading of Section 174(2) of the CGST Act that the amendment to the Finance Act by omission of Chapter-V of the Finance Act would not affect the operation of the amended Act (Finance Act) and it would also not affect any obligation or liability accrued or incurred under the Finance Act - Clause (d) of Section 174(2) of the CGST Act also expressly provides that the amendment to the Finance Act would not affect any duty, tax, surcharge, fine, penalty or interest as due or may become due under the amended Act. Thus, on a plain reading of Section 174 of the CGST Act, it is clear that the obligation of the petitioner to pay the service tax due in respect of the Financial Years 2014-15 to 2017-18 (April June) is not affected in any manner by the omission of Chapter-V of the Finance Act by enactment of Section 173 of the CGST Act. In VIANAAR HOMES PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER (CIRCLE-12) , CENTRAL GOODS SERVICES TAX, AUDIT-II, DELHI ORS. 2020 (11) TMI 150 - DELHI HIGH COURT , this Court had rejected the contention that Rule 5A of the Service Tax Rules, 1994 did not survive the omission of Chapter V of the Finance Act in respect of the period prior to the enactment of the CGST Act. Any legal proceeding for enforcement of a right would be unaffected by the repeal of the statute. However, any hope or expectation of acquiring a right under a repealed provision may be affected. In the present case, there is no dispute that the impugned SCN was issued in exercise of the duty to ensure compliance with the provisions of Chapter-V of the Finance Act. As stated above, the petitioner has an obligation to correctly pay the service tax under Chapter-V of the Finance Act and the proceedings initiated by the impugned SCN are merely to ensure discharge of the said obligation. Petition dismissed.

Summary

Issues Involved:
1. Validity of demands for service tax payments post CGST Act enactment.
2. Applicability of Section 174 of the CGST Act on past service tax liabilities.
3. Interpretation of rights and obligations under repealed statutes.

Summary:

1. Validity of demands for service tax payments post CGST Act enactment:
The petitioner, a company engaged in foreign exchange, challenged letters demanding service tax payments for FY 2014-15 to 2017-18 and a Demand Cum Show Cause Notice. The petitioner argued that with the enactment of the CGST Act and the omission of Chapter-V of the Finance Act, no fresh proceedings for assessment or recovery of service tax could be initiated.

2. Applicability of Section 174 of the CGST Act on past service tax liabilities:
The court referred to Section 173 and Section 174 of the CGST Act, which state that the repeal of the Finance Act does not affect any duty, tax, surcharge, fine, penalty, or interest due. The court emphasized that the obligation to pay service tax for the specified period remains unaffected by the omission of Chapter-V of the Finance Act.

3. Interpretation of rights and obligations under repealed statutes:
The court relied on previous decisions in Aargus Global Logistics Pvt. Ltd. and Vianaar Homes Pvt. Ltd., which upheld the continuation of obligations and liabilities under the repealed Finance Act. The court rejected the petitioner's contention that no accrued right existed in favor of the State due to the absence of pending proceedings as of 01.07.2017. It clarified that the obligation to pay service tax was crystallized before the CGST Act's enactment and survives its omission.

Conclusion:
The petition was dismissed, affirming that the service tax obligations and corresponding enforcement actions remain valid despite the repeal of Chapter-V of the Finance Act by the CGST Act. The court found no merit in the petitioner's arguments, aligning with prior decisions that support the continuation of such obligations.