2021 (7) TMI 520 - HC - Service Tax

Challenging the order of the settlement application - erroneous demand of interest - HELD THAT - This Court is of the considered opinion that admittedly the application filed under Section 32E of the 1944 Act, for settling the issues, was entertained by the Settlement Commission. The Settlement Commission also adjudicated the issues with reference to the informations and particulars provided by the assessee. The Settlement Commission accepted the terms of reference and finally granted immunity to the applicant/petitioner from prosecution and the order was passed. The petitioner has no grievance in respect of the other orders passed, except the interest portion directed to be paid by the petitioner. It is clear that it is an admitted fact that the applicant/petitioner has raised bill on the service recipient charging 100% of the applicable rate of service tax. Having charged service tax at 100% and paying only 50% of the tax to the Government clearly establishes short payment by service provider, attracting interest. Under these circumstances, the Settlement Commission held that interest is chargeable from the date on which the service tax became payable by the applicant/petitioner, as alleged in the show cause notice, as contended by the jurisdictional Commissioner. Thus, the Settlement Commission settled the service tax liability and interest liability at ₹ 81,59,255/- and ₹ 14,61,006/- respectively. This Court is of the opinion that the order passed by the Settlement Commission, pursuant to the admission made by the parties, need not be interfered with. However, if there is any error apparent on record or if there is any factual error regarding the admitted statements, the Settlement Commission is empowered to rectify such mistakes by following the procedures contemplated. In this regard, the petitioner is at liberty to file an application, if required. Petition disposed off.

Summary

Issues:
Challenge to order of Customs, Central Excise and Service Tax Settlement Commission regarding interest payment by petitioner.

Analysis:
The petitioner, holding valid service tax registration, rendered works contract service to a recipient who reimbursed only 50% of the service tax directly to the Government. The petitioner paid the remaining 50% to ensure full tax payment. An application was filed before the Settlement Commission under Section 32E of the Central Excise Act, 1944, requiring full disclosure of duty liability. The Settlement Commission entertained the application and granted immunity from prosecution after adjudication.

The petitioner contended that interest payment directed by the Settlement Commission was erroneous as the full service tax had been paid. The respondent-Department argued that there was a short payment leading to interest charges, which were settled by the Commission. The Commission found that the petitioner had indeed underpaid service tax, attracting interest from the date it became payable, settling the tax and interest liabilities.

The Settlement Commission's decision was based on admitted facts of the case. Any errors in the findings could be rectified by the Commission upon application by the petitioner. The High Court cannot interfere in such matters requiring examination of original records and admission statements. The Court held that the Commission's order need not be interfered with unless there are factual errors, which can be rectified by the Commission upon application.

In conclusion, the writ petition challenging the Settlement Commission's order on interest payment was disposed of without costs. The petitioner was advised to approach the Commission for rectification of any factual errors if needed.