A historic judgment for Government to learn Retrospective lessons.

Accommodation Times Bureau

By Dr Sanjay Chaturvedi

British Prime Minister had specifically called upon Prime Minister Dr Manmohan Singh and shown his government’s concern over Vodaphone Tax matter decided by Supreme Court of India but Government of India wants rules change retrospectively to corner Rs.11000/- crore taxes on deals which under Indian law and various international Treatities do not qualify for any tax in India. Indian Government and various state governments are waking up from hibernation and wants to make good the wrong doing while exchequers lost revenue or did act which were against the law.

Let us see various such cases in Real Estate. Very first forest land issue in Mumbai. What is the fault of Builders and purchasers? The State Government of Maharashtra through its various agencies like Registrar of Assurances who registered documents on such land, Local self Government like BMC who passed planes, various law firm who certified the title of land for housing finance companies and Forest Departments were sleeping for two decades and waited things to happen. Now, Since the forest land needs to be restored all the agencies instead of biting their shoes now transfer the onus on poor property purchaser.

Second case and very recent case in Union Budget. MP Arun Jaitly were filing his objections in Lok Sabha said that Retrospective Provisions of Budget like for opening 16 year old cases overseas will shake the investor’s confidence in India and overseas FII and Hedge Funds will exit without any notices. (Sec 147 & 149)

Delhi High Court came recently with a land mark order in Service Tax implementation for Renting of Immovable properties with retrospective effect from year 2007 and Bombay High Court had also given its verdict that Service Tax is applicable as the Act had provided in the case of Maharashtra Chamber of Housing Industry (MCHI) case. The chamber lost its writ to the mighty will of government to impose taxes. The onus was again on poor property purchasers.

In the case of Hiranandani and MHADA, government thought that the milking cow was left without any contribution towards so called social upliftments, have slapped a notice and dragged the builder to various courts. If the developers was in fault, just like in case of forest land issue, why the authorities have cleared the its plans and sanctioned OC? why at the time of passing the plans such type of practices were not checked? In MHADA’s case, when Gorai LIG plots were sold and later found it was in CRZ area. Lack fund to refund, state government amended its CRZ plan retrospectively and allowed some 5000 residential plots to construct.

In the case of Aadharsh, though there are IAS and other high ranked officers are members, where were all the authorities who gave Aadarsh to happen. It is now like challenging the prerogatives of authorities on different grounds. Or those who left out wants their scored leveled?

Let us see some of the provisions in the Union Budget presented in March 2012 which have retrospective effects. :

1. Section 49 says that transfer of proprietary assets to firm or company will have retro effect since 1st April 1999.

2. Rule 6(6A) of the Cenvat Credit rules for SEZ for demands for reversal of credits in respect of services provided to SEZ for the past, effective from 10th Fenruary 2006.

3. Exemption provided for treatment of solid waste from 16th June 2005.

4. Exemption relating to roads extended for the earlier period commencing from 16 June 2005.

5. Service Tax for management, maintenance or repair service in relation to non-commercial government building from 16th June 2005.

6. Section 9(1)(vi) explanation 4, the Royalty provisions on Computer Software with effect from 1st June 1976.

7. Section 10 (23C) and section 13 and Section 143 (3) Assessment of Charitable organisation will be have retro effect from 1st April 2009.

8. Section 92C, computation of Arm’s Length Price on determining arithmetic means, w.e.f 1st Oct 2009.

9. Section 92CA and 92E for examination by the Transfer Pricing Officer of International Transactions not referred by the Assessee w.e.f 1st June 2002.

10. Section 111A Rate of Tax for Short Term Capital Gain w.e.f. A.Y 2009-10.

11. Section 144C completion of assessment in search cases referred to in DRP w.e.f 1st October 2009.

12. Section 201(1) Time limit for passing an order w.e.f A. Y. 2010-11

13. Section 234D explanation 2 , levy of Interest w.e.f 1st June 2003.

14. Section 292CC, Authorisation and subsequent assessment in search cases w.e.f 1st April 1976.

A historic judgment by Income Tax Department has issued SCN by invoking extended period on the ground that assesse has suppressed the fact or made mis-declaration as assesse has utilized CENVAT credit for the payment of Service tax on GTA Services.

It was held that till the decision in the case of ITC Ltd., all the decisions were in favour of the respondents and therefore invoking suppression or mis-declaration etc. for confirmationof demand is not in order. Further, I also take note of thesubmission made by the ld. Counsel that even the original adjudicating authority has taken a view that the failure on the part of the assessee is acceptable as a bona fide error and cannot be attributed to be wilful intention to evade tax. In view of the above discussion, appeal fails on the ground of limitation alone and I am not going into merits since appeal can be rejected only on this ground. Appeal filed by the Revenue as well as the Cross-objection filed by the respondent get disposed of.

IN THE CESTAT, BANGALORE

COMMISSIONER OF CENTRAL EXCISE, MYSORE

Versus

REID & TAYLOR (INDIA) LTD.

Final Order No. 397/2011 and Misc. Order No. 305/2011, dated 20-6-2011 in

Appeal No. ST/780/2009 and Cross Objection No. ST/CO/110/2010

[Order]. – During the period from January, 2005 to March, 2006, the respondents utilized cenvat credit for payment of service tax on GTA services received by them. Revenue entertained a view that this is not correct and accordingly proceedings were initiated which has resulted in impugned order wherein the ld. Commissioner has held in favour of the respondents on merits relying upon several decisions of the Tribunal. Revenue is in appeal.

2. Ld. DR on behalf of the Revenue submitted that in the case of ITC Ltd. v. CCE, Guntur [2011-TIOL-568-CESTAT- BANG = 2011 (23) S.T.R. 41 (Tri.- Bang.], the Tribunal has taken a view that Service tax on GTA services received by assesses who are engaged in providing some taxable service/manufacture of dutiable final products cannot payservice tax on GTA services received by them by utilizing cenvat credit. He submits that this is the latest decision and fairly admits that there were several decisions in the past wherein a view was taken that cenvat credit can be used for payment of service tax on GTA services by recipients.

3. Ld. Counsel submitted that there were several decisions wherein a view was taken in favour of the respondents and in the case of CCE, Belgaum v. Shri Tubes & Steels Pvt. Ltd. [2011 (21) S.T.R. 370 (Tri.-Bang.)], the Tribunal also took the same view and in fact in that case the Tribunal had considered several decisions rendered on the same subject unlike in ITC Ltd. case where only Panchmahal Steel Ltd. [2008 (12) S.T.R. 447 (Tribunal)] case was referred to. Further he also submits that respondent has a very strong case on limitation and all the decisions rendered by the Tribunal were in favour of the respondents and therefore suppression of facts or mis-declaration could not have been invoked and in this case show-cause notice was issued in December, 2007 where the period for which the demand has been made is from January, 2005 to March, 2006.

4. I have considered the submissions made by both sides. Since I find that on limitation itself appeal can be allowed, I do not propose to go into merits at all in view of the fact that two co-ordinate Benches have taken different views on the subject. Of course in the case of ITC Ltd. in para 8 and 8.1. provisions of Rule 2(r) and Rule 2(q) of Cenvat Credit Rules have been discussed and on this ground also decisions have been differentiated. However, the fact remains that till the decision in the case of ITC Ltd., all the decisions were in favour of the respondents and therefore invoking suppression or mis-declaration etc. for confirmation of demand is not in order. Further, I also take note of the submission made by the ld. Counsel that even the original adjudicating authority has taken a view that the failure on the part of the assessee is acceptable as a bona fide error and cannot be attributed to be wilful intention to evade tax. In view of the above discussion, appeal fails on the ground of limitation alone and I am not going into merits since appeal can be rejected only on this ground. Appeal filed by the Revenue as well as the Cross-objection filed by the respondent get disposed of.

(Pronounced and dictated in open court)


Dr. Sanjay Chaturvedi
Executive Editor
Accommodation Times





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