2021 (7) TMI 95 - AT - Service Tax

Delayed payment of service tax - completion certificate valid or not - residential complex constructed by the appellant from Gram Panchayat, Chota Bangarda - levy of interest - time limitation. Completion certificate dated 5.2.2013 received in favour of the residential complex constructed by the appellant from Gram Panchayat, Chota Bangarda is valid certificate or not? - HELD THAT - Though on the date when completion certificate was issued in favour of the appellant by the Gram Panchayat, Chotta Bangarda, the impugned area, the jurisdiction thereof got vested with IMC, Indore. But once the said notification got quashed in February, 2014 the jurisdiction stands revested in Gram Panchayat itself. Thus the Show Cause Notice of October, 2017 should not have been issued. Except for 17 days i.e. with effect from 5.2.2013 to 22.2.2013 Gram Panchayat, Chota Bangarda was not the competent authority in terms of Section 66E (b) of the Finance Act. Rather the said Gram Panchayat was the, competent authority when it issued the permission to construct the said residential complex. The competence of said Gram Panchyat got retained from the order of High Court of February, 2014 - the completion certificate dated 22.2.2017 as was issued by Gram Panchayat was absolutely valid, at the time the Show Cause Notice was issued to the appellant - SCN is void. Levy of interest on account of late payment of service tax - HELD THAT - It is observed that the appellant herein has issued the receipt of installment as and when the installment was received no invoice was ever issued by the appellant. The sale deed is a legal documents of the title of property hence cannot be termed as invoice. Also the date of completion of service will be the date when possession of the property is given to the purchaser which shall only be after receipt of sale consideration and the date of receiving final installment, therefore, later will be the relevant date for determination of point of taxation. The calculation placed on record reveals that the service tax liability has been discharged as and when the payment of requisite installment has been received by the appellant. Above all, there is no evidence produced by the Department to the contrary - there is no late payment of service tax by the appellant as is alleged by the Department. Imposition of interest on the ground of late payment is not sustainable. SCN is barred by time - HELD THAT - It is on record that the appellant was discharging the service tax liability as and when the installment toward the sale consideration of the property used to be received by the appellant. No mala fide intent can be attributed to such an assessee who otherwise has been regularly discharging the tax liability. Mere evasion of tax does not invite penalties unless and until there is the evidence of some positive act on part of the appellant to show his intend to not to pay the tax. The said evidence is miserably missing in the present case. The proviso to Section 73 of Finance Act could not have been invoked by the Department in the present case - In present case, Show Cause Notice of the year 2017 raising the demand from the year 2012 onwards is, therefore held barred by time. The findings of the Commissioner (Appeals) are hereby set aside - Appeal allowed.

Summary

Issues Involved:
1. Validity of the completion certificate dated 5.2.2013 issued by Gram Panchayat, Chota Bangarda.
2. Liability of the appellant to pay interest of ?88,754/- on account of late payment of service tax.
3. Whether the Show Cause Notice is barred by time.

Issue-Wise Detailed Analysis:

Issue No. 1: Validity of the Completion Certificate
The appellant received permission to construct the residential complex from Gram Panchayat, Chota Bangarda, and obtained the completion certificate from the same authority. The Department argued that the area fell under the jurisdiction of Indore Municipal Corporation (IMC) as per a notification dated 5.2.2013. However, this notification was quashed by the High Court of Madhya Pradesh on 3.2.2014, thereby reinstating the jurisdiction of Gram Panchayat. The Tribunal held that the completion certificate issued by Gram Panchayat on 22.2.2013 was valid, as the notification was quashed retrospectively. Consequently, the Show Cause Notice issued in October 2017 was deemed void.

Issue No. 2: Liability to Pay Interest on Late Payment of Service Tax
The Department's claim for interest was based on the assertion that the service tax liability arose on the date of the sale deed. The Tribunal referred to Rule 3 of the Taxation Rules, 2011, which determines the point of taxation as either the time when the invoice is issued, the date of completion of service, or the date when an advance is received. The appellant issued receipts for installments as they were received and did not issue invoices. The Tribunal concluded that the service tax liability was discharged as and when installments were received, and there was no evidence of late payment. Therefore, the imposition of interest was not sustainable.

Issue No. 3: Whether the Show Cause Notice is Barred by Time
The appellant was regularly discharging the service tax liability upon receiving installments. The Tribunal found no evidence of fraud, collusion, willful misstatement, or suppression of facts by the appellant. Citing the case of CCE Vs. Renee Telepoint, the Tribunal held that penalties cannot be imposed under Section 78 of the Finance Act without evidence of intent to evade tax. Consequently, the Show Cause Notice issued in 2017 for demands from 2012 onwards was barred by time.

Conclusion:
The Tribunal decided all three issues in favor of the appellant, setting aside the findings of the Commissioner (Appeals). The appeal was allowed, and the adjudicating authority was found to have erred in its interpretation of the High Court's decision quashing the notification. The judgment was pronounced in court on 30.06.2021.