2012 (12) TMI 423 - HC - Service Tax

Demand of service tax on renting of immovable property - Extended period of limitation - Show Cause notice (SCN) has been issued on 18 th April, 2012 in respect of the financial years 2007-2008, 2008-2009, 2009-2010 and 2010-2011 - The allegation against the petitioner is that the petitioner did not disclose the material fact that the petitioner had engaged in providing taxable services and had suppressed facts with intention to evade payment of service tax on the service of Renting of Immovable Property . It is alleged that the assessee had thus failed to comply with the requirements of the statutory provisions of the Finance Act, 1994 and the rules made thereunder and had wilfully suppressed facts related to providing/receiving of the said service with intent to evade payment of service tax. Held that - Prima facie, there is no whisper in the impugned notice of the facts which have allegedly been suppressed. Prima facie, the vague assertion that the petitioner had wilfully suppressed facts pertaining to providing/receiving the services with intent to evade payment of service tax is unfounded. A notice was issued by the Office of the Commissioner, Service Tax, Kolkata dated 13 th April, 2009 calling upon the petitioner to submit copies of lease agreements including list of long term lease agreements. It prima facie appears to this Court that the requisites of the aforesaid notice dated 13 th April, 2009 were complied with. The provisions of the Finance Act, 1994 relating to the service of renting of immovable property have been amended by the Finance Act, 2011 with retrospective effect. The amendment with retrospective effect from 1 st June, 2007 makes rent per se a taxable service. Earlier in Home Solution Retail & Anr. Vs. Union of India & Ors. (2009 (4) TMI 14 - DELHI HIGH COURT), the Delhi High Court had held that rent per se was not a taxable service. Prima facie, the entire claim except for four receipts as stated above are barred by limitation. Prima facie, jurisdiction has been exercised by wrongly deciding jurisdictional facts. Prime facie the Commissioner of Service Tax has not properly applied his mind to the issue required to be addressed for invoking the extended period of limitation. There will accordingly, be an interim order restraining the respondents from giving effect and/or further effect to the impugned show-cause notice till 21 st December, 2012 or until further orders whichever is earlier.

Issues Involved:
1. Challenge to the show-cause notice-cum-demand on grounds of limitation and jurisdiction.
2. Applicability of the extended period of limitation under Section 73 of the Finance Act, 1994.
3. Allegations of suppression of facts and intent to evade payment of service tax.
4. Jurisdictional errors in the issuance of the show-cause notice.
5. Interim relief sought by the petitioner.

Detailed Analysis:

1. Challenge to the Show-Cause Notice-Cum-Demand on Grounds of Limitation and Jurisdiction:
The writ petition challenges the show-cause notice-cum-demand dated 18th April 2012, alleging service tax dues amounting to Rs. 9,53,69,284/- for renting immovable property for the periods 2007-2008 to 2010-2011. The petitioner contends that the notice is barred by limitation and therefore, without jurisdiction.

2. Applicability of the Extended Period of Limitation Under Section 73 of the Finance Act, 1994:
Section 73 of the Finance Act, 1994 allows recovery of service tax not levied or paid within one year from the relevant date. However, the proviso extends this period to five years in cases involving fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with intent to evade tax. The notice was issued on 18th April 2012, invoking the extended period for financial years 2007-2008 to 2010-2011. The court noted that except for a few receipts, the notice is prima facie barred by limitation as it was issued after one year.

3. Allegations of Suppression of Facts and Intent to Evade Payment of Service Tax:
The show-cause notice alleges that the petitioner did not disclose material facts and suppressed information to evade service tax on "Renting of Immovable Property Service." The petitioner is accused of failing to comply with statutory provisions and wilfully suppressing facts with intent to evade tax. The court found the reasons for invoking the extended period vague and lacking material particulars. There was no specific allegation of fraud, collusion, or wilful misstatement.

4. Jurisdictional Errors in the Issuance of the Show-Cause Notice:
The court emphasized that the question of limitation is a jurisdictional issue. The Commissioner has no authority to issue a notice after the prescribed limitation period. The court cited several judgments, including M/s. Raza Textiles Ltd. and Calcutta Discount Company Ltd., to support the view that a quasi-judicial authority cannot confer jurisdiction on itself by erroneously deciding a jurisdictional fact. The court found that the Commissioner did not address the necessary issues for invoking the extended period of limitation and proceeded on the assumption of contravention without proper examination.

5. Interim Relief Sought by the Petitioner:
The petitioner sought an interim order to restrain the respondents from giving effect to the impugned show-cause notice. The court granted an interim order restraining the respondents from acting on the notice till 21st December 2012 or until further orders. The court also directed the filing of affidavits and scheduled the writ application for hearing on 27th November 2012.

Conclusion:
The court's prima facie observations suggest that the show-cause notice may be barred by limitation and lacks specific allegations of fraud or suppression. The Commissioner of Service Tax may have erroneously exercised jurisdiction by not properly addressing the issues required for invoking the extended period of limitation. The interim order restrains the respondents from acting on the notice, pending further proceedings.

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