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TMI Blog2014 (1) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... to as 'the SCN') by the Additional Director, DGCEI, Jamshedpur (hereinafter referred to as 'the DGCEI') answerable to the Additional Commissioner of Central Excise and Customs, Bhubaneswar-II Commissionerate, Rajaswa Vihar, C.R. Building, Bhubaneswar. 2. Briefly, the facts of the case are that - 2.1 As per the show cause notice - (i) The applicant having service tax registration number AAACK7210KSD001 rented their premises (to M/s. ICICI Bank, Rourkela, M/s. SBI Life Insurance, Rourkela and M/s. GEOGIT BNP Paribas, Rourkela) for furtherance of business and commerce and received rental amounts from them for the purpose but did not pay service tax under "Renting of immovable property service" classifiable under Section 65(105)(zzzz) of the Finance Act, 1994. In the show cause notice issued, the applicant is alleged to have caused loss to the Government Exchequer by way of not paying the Service Tax (including cesses) of Rs. 17,38,907 by reason of wilful suppression of fact, misstatement and contravention of the provisions of Service Tax Rules, 1994 with intent to evade payment of service tax which is recoverable along with interest an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the concerned department." On being asked whether he is depositing Service Tax to the department for providing of service on Renting of Immovable Property Service, he replied in the affirmative submitting that "The total Service Tax amount with appropriate interest from November, 2007 to December, 2011 have been deposited to the department and copies of challan have been submitted to you." (vi) The show cause notice alleged that the applicant (referred to as "KEPL" in the show cause notice) has taken Service Tax Registration from the Department for providing services of "renting of immovable property" is "not paying the service tax as well as not submitting the ST-3 returns to the department." (vii) The applicant was receiving rental amount from its tenants viz. M/s. ICICI Bank Ltd., M/s. SBI Life Insurance and M/s. Geojit BNP Paribas ('the service receivers' for short) towards renting of its building to them for furtherance of their business and commerce. Accordingly, DGCEI made correspondence with the service receivers and the applicant and on receipt of the information called for, it appeared that the applicant was providing its building located at Unit N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om January, 2008 (after availing the exemption limit period). That this implied that they were very well aware of the fact that they are liable for service tax for the past period on the taxable service provided by them. But it was only after receiving letter from DGCEI, Rourkela Regional unit, KEPL (the applicant) has paid the service tax for the past period on their own assessment. That, hence, it appears that, had the officers of DGCEI not detected this case, this case could have remained undetected and KEPL (the applicant) would have not paid Service Tax for the past period. Therefore, it appears that the noticee have wilfully suppressed the fact of their liability for payment of service tax on "Renting of Immovable Property Service" for the period from January, 2008 to November, 2011 from the department with an apparent motive to evade Service Tax. (x) Para 6.0 of the show cause notice spells out the violations in the facts and circumstances which include the provisions of Chapter V of the Finance Act, 1994 and the Service Tax Rules, 1994 and their failure to submit the ST-3 returns for the service rendered. (xi) After completion of inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; In the brief facts of the case (in their application), the applicant have submitted that the activity of renting out of immovable property is taxable under the category of "Renting of Immovable Property Service" as defined under Section 64(105)(zzzz) of the Act and that they have obtained Registration bearing, number AAACK7210KSD01 with effect from 30-4-2009 for providing the said taxable service. (v) That they did not collect/pay any service tax from their clients during the initial period, that is, 2007-08 in view of the SSI exemption available on aggregate value of taxable services upto Rs. 8 lakhs, as it existed during the material period of time. That after the crossing the threshold exemption limit of Rs. 8 lakhs, they started following their client for reimbursement of service tax, but the client M/s. ICICI Bank, Rourkela in response to the applicant's constant follow up for reimbursement of service tax, vide letter dated 26-12-2009 contended that levy of service tax on 'Renting of Immovable Property Services' under Section 65(105)(zzzz) is declared ultra vires by the Hon'ble High Court of Delhi in the case of M/s. Home Soluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their ST-3 returns for the half year ending September, 2011 and half year ending March, 2012 filed before the jurisdictional Range Superintendent. The applicant has also accounted for receipt of taxable services and payment of service tax thereon in their books of account. (xiii) That all conditions enumerated under the proviso to Section 32E of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994 have been fulfilled and that the application be allowed to be admitted and settled in accordance with law and that they be granted immunity from penalty under the Act and also under any other law in terms of Section 32K of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994 by Section 143 of the Finance Act, 2012. It was prayed to grant immunity from penalty, punishment, prosecution and/or any other action under the Finance Act, 1994, Central Excise Act, 1944 or under any other law for the time being in force. 2.3 DGCEI SUBMISSIONS - The Assistant Director, DGCEI, Rourkela Unit, Rourkela in his report dated 24-5-2013. It was submitted - (i) that the levy of service tax on "renting of immovable propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 15,000 and thus the monthly rental amount of Rs. 15,000 is excluding of service tax. (vi) that in regard to the applicant's submission at para 8.7 of the application that they did not collect/pay any service tax from their clients during the initial period, i.e., 2007-08 in view of SSI exemption, it was submitted by DGCEI that there was no comments as the applicants has got the relief of exemption limit of Rs. 8,00,000 as per Service Tax Rules. (vii) regarding the submission of the applicant that in response to the applicant's constant follow up for reimbursement of service tax, the service receiver M/s. ICICI Bank contended that the levy was declared ultra vires by the Hon'ble High Court of Delhi in the case of M/s. Home Solutions Retails India Ltd. v. UOI - 2009 (237) E.L.T. 209 (Del) = 2009 (14) S.T.R. 433 (Del.), it was contended by DGCEI that consequent upon release of Hon'ble Delhi High Court judgment, the department had filed SLP before the Hon'ble Supreme Court against the said judgment in SSIPL Retail Ltd. v. Union of India - (2010) 24 STT 571 (Delhi) = 2010 (18) S.T.R. 262 (Del.) and in the meanwhile, issued notices to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant consequent upon amendment made in the Finance Act, 2010 and issue of circular during 2010 and deposited the same in Government account, but the applicant deliberately avoided discharging the service tax liabilities. (ix) Regarding the submission of the application that non-collection and non-payment of tax was due to the liquid state of law, it was contended by DGCEI that it was clearly stated in the agreement made between the house applicant/house owner and the tenant that the service tax to be deposited by the house owner and same to be claimed from the tenant. Hence by virtue of the said agreement, the applicant should have collected the service tax and deposited to the Government account whereas the applicant, instead of complying that, has taken a different view to avoid tax liability. (x) that Section 70(1) of Finance Act, 1994 (as amended with effect from 8-4-2011) provides that in cases where returns are filed after due date, late fee not exceeding Rs. 20,000 is payable for delayed filing of return as may be prescribed and that the number of days delayed in filing of return will be calculated per Rule 7C of Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72,182 was reflected as arrear of Rs. 14,83,816 as service tax, Rs. 4,46,367 as interest and Rs. 1,40,000 as penalty under Section 70 of the Act read with Rule 7C of Service Tax Rules, 1994. As per Annexure-III to the application for settlement the amount paid is Rs. 16,15,881, showing short-payment of Rs. 1,75,205. The SCN page 10, para 7.0(E) reflected deposit of Rs. 20,08,817 on 22-12-2011. 2.7 While admitting the additional liability towards Service Tax in excess of Rs. 3 lac, and claiming to have made full and true disclosure, the applicant prayed for admission of the applications for settlement, adjustment of total amount of duty and interest from the amount already deposited, and for grant of immunity from payment of penalty, punishment as well as immunity from prosecution under the Act or under any other law for the time being in force. For serial numbers 11 and 12 of the application regarding any other application and debar under Section 32-O of the Central Excise Act, 1944 as made applicable to Service Tax matters under Section 83 of the Finance Act, 1994, the response of the applicant is in the negative. 3. Hearing wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od. In order to clarify the legislative intent and also bring in certainty in tax liability the relevant definition of taxable service was amended to clarify that the activity of renting of immovable property per se would also constitute a taxable service under the relevant clause. This amendment was given retrospective effect from 1-6-2007. Based on the amendment and the circular cited above, the Hon'ble Delhi High Court dismissed the Writ Petition in Home Solution Retails Ltd. v. UOI - (2010) 26 STT 418 (Delhi) = 2010 (19) S.T.R. 3 (Del.) and ordered for levy of service tax against the services on "renting of immovable property" with retrospective effect." 5. The applicant has applied for settlement of the case for the period January, 2008 to November, 2011 and has stated in his application that no returns have been filed. The counsel for the applicant has argued that no penalty can be imposed on the applicant for any act or omission as a service provider during the material period for which the service tax liability was made effective through retrospective legislation and has invited reference to the Explanation to Section 77 of the Finance Act, 2010 [Act number 14 of 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sra, Rourkela for the period in question, which fact has also been mentioned in its application while coming before the Settlement Commission. What happens when returns are not filed? In this connection, it may be useful to refer to the following cases - (i) IN RE : Emerson Electric Company (India) Private Limited before the Special Bench, Settlement Commission [Special Bench Order Number 1/CEX/2005, dated 13-6-2005 [2005 (189) E.L.T. 377 (Sett. Comm.)] - In the said case it was held by the Special Bench of the Settlement Commission as under - "(b) Whether a consolidated return filed just before filing the application or along with the application by a person who is not registered with Central Excise and did not obtain ECC Number can be considered as satisfying the condition in Clause (a) of Section 32E(1) of the CEA, 1944." The Answer is "No. ... 'returns' are to be filed by an assessee on a monthly/quarterly basis. There is no provision for filing of these 'returns' in a consolidated manner covering more than one month. Though there is no specific bar against filing of belated returns relating to a particular month, there is no provision for consol ..... 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