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Bona fide belief/Retrospective amendment in law doesnt warrant invocation of extended period of limitation
Posted In Service Tax | Judiciary | No Comments The provisions of the Finance Act, 1994 relating to the service of renting of immovable property had been amended by the Finance Act,

2011 with retrospective effect from 1-6-2007 making rent per se a taxable service. Earlier in Home Solution Retail (India) Ltd. v. Union of India [2009] 20 STT 129 (Delhi), the Delhi High Court had held that rent per se was not a taxable service. It was settled law that mere failure to declare would not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression. On a perusal of the show-cause notice there was no allegation of any conscious act on the part of the assessee that constitutes fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of the Finance Act, 1994 or any rule made thereunder with intent to evade service tax. The assessee was duly registered with effect from the year 2007. The dispute was only with regard to service tax allegedly payable on the premium received during the period in question. Prima facie, in view of the Delhi High Court judgment in Home Solution Retail (India) Ltd.s case (supra) holding that service tax was not payable on rent of immovable property per se, the assessee was not liable for rent on premium. In any case, prima facie there was some confusion as to whether renting per se was taxable for which the law had to be amended. The assessee was under the impression that no service tax would be payable on premium and/or salami, on its interpretation of the law, which was a possible interpretation accepted by the Delhi High Court in Home Solution Retail (India) Ltd.s case (supra). HIGH COURT OF DELHI Infinity Infotech Parks Ltd. v. Union of India W.P. NO. 21549 (W) OF 2012 SEPTEMBER 28, 2012 JUDGMENT 1. This writ petition has been filed challenging show cause notice-cum-demand being C. No. V(3) 222/SCN/Adjn/Infinity/ST/11/457 dated 18th April, 2012 wherein it has been alleged that service tax amounting to Rs. 9,53,69,284/- including cess was due and payable by the petitionercompany for the service of renting of immovable property during the period 2007-2008, 2008-2009, 2009-2010 and 2010-2011.

Under Section 65(105)(zzzz) of the Finance Act, 1994 any service provided or to be provided to any person, by any other person, by renting of immovable property or any other service in relation to such renting for use in the course of or for furtherence of, business or commerce is a taxable service. The impugned notice was issued on the allegation that the petitioner had not paid service tax on the amount collected as premium during the years 2007-2008, 2008-2009, 2009-2010 and 2010-2011. The impugned notice has been challenged on the ground of the same being barred by limitation, and therefore, without jurisdiction. Section 73 of the Finance Act, 1994 provides as follows: 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words one year, the words five years had been substituted. Explanation: Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be. ** ** **

2. The (Central Excise Officer) shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined: ** ** **

3. Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid: Provided that the (Central Excise Officer) may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. [Explanation 1]: For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer] but for this sub-section. [Explanation 2]: For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon.] 4. Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of(a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax.

4A. Notwithstanding anything contained in sub-sections (3) and (4), where during the course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, but the true and complete details of transactions are available in the specified records, the person chargeable to service tax or to whom erroneous refund has been made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with interest payable thereon under section 75 and penalty equal to one per cent. of such tax, for each month, for the period during which the default continues, up to a maximum of twenty-five per cent. of the tax amount, before service of notice on him and inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub-section (1) in respect of the amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been concluded: Provided that the Central Excise Officer my determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1). Explanation: For the purposes of this sub-section and section 78, specified records means records including computerized data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.] 5. The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003. 6. For the purposes of this section, relevant date means, (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.] On a perusal of the said Section it is amply clear that any tax not levied or paid, short levied or short paid might be recovered from the petitioner. The

show cause notice for realisation of tax not levied or paid or short levied or short paid could be issued within one year from the relevant date. After amendment with effect from 28th May, 2012 by the Finance Act, 2012, the period of limitation is 18 months instead of one year. However, in view of the Proviso, where service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of Chapter V of the Finance Act, 1994 with intention to evade service tax notice may be issued within five years instead of one year. Admittedly, in this case, notice has been issued on 18th April, 2012 in respect of the financial years 2007-2008, 2008-2009, 2009-2010 and 20102011 by invocation of the extended period of limitation. From the show cause notice itself it is apparent that except in relation to the last two receipts and two other receipts one of 1st January, 2011 and the other of 1st March, 2011, the notice is hit by limitation, the same having been issued after expiry of one year. The question is whether the conditions precedent for invocation of the extended period of limitation existed. The reasons for invoking the extended period of time are stated in paragraphs 9 and 10 of the show cause notice, which are set out herein below for convenience: 9. Here the said assessee did not disclose the material fact that they engaged in providing taxable services and suppressed the above facts with intension to evade the payment of Service Tax on Renting of Immovable Property Service. Thus, the said assessee has failed to comply with the requirement of statutory provisions of the said act and the said rules and have willfully suppressed the facts of providing/receiving the said services with intent to evade payment of Service Tax. Had the audit tem not visited the premises of the said assessee and unearthed the material fact, the said assessee would have been continuing the evasion. Therefore proviso to Section 73(1) is inviolable for extended period of time and they are liable for penal action under section 78 of the said Act. 10. Thus, it appears that the said assessee has violated the provisions of section 68 of the said Act read with Rule-6 of the said rules with intent to evade payment of Service Tax. Moreover, for delayed payment of Service Tax, they are liable to pay interest at appropriate rate as per Section 75 of the said Act. 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. The show-cause notice has apparently been issued pursuant to the observations made by CERA Audit Team of the Office of the Comptroller and Auditor General of India who had visited the premises of the petitioner. In paragraph 9 there is a sweeping statement that if the Audit Team had not visited the premises of the said assessee and unearthed material facts, the assessee would have been continuing the evasion. Therefore, proviso to Section 73(1) is invocable for extending time. It prima facie appears to this Court that the reasons for invoking the extended period of limitation, as disclosed, are totally vague and devoid of material particulars.

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 13th 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 13th 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 1st June, 2007 makes rent per se a taxable service. Earlier in Home Solution Retail (India) Ltd. v. Union of India [2009] 20 STT 129 (Delhi), the Delhi High Court had held that rent per se was not a taxable service. The interim orders as prayed for by the petitioner have vehemently been opposed on behalf of the respondents. The respondents have contended that the petitioner was liable to pay service tax during the period in question, which they have not done. The CERA Audit Team which had visited the premises of the said assessee to unearth the loss of revenue allegedly detected evasion. As there was loss of revenue, the extended period has, according to Mr. Roy Chowdhury, rightly been invoked. There has been contravention of the provisions of Chapter V of the Finance Act and the Rules made thereunder. The provisions of Section 73(1) of the Finance Act are in pari materia with Section 11A of the Central Excise Act, 1944, which is set out herein below for convenience: Section 11A - Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or [erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder], a Central Excise Officer may, within [one year] from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or shortpaid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, [as if, [***]] for the words [one year], the words five years were substituted: ** ** **

Explanation.- Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid

period of [one year] or five years, as the case may be. In CCE v. Bajaj Auto Ltd. [Civil Appeal No. 3860 of 2006, dated 12-11-2010] cited by Mr. J.K. Mittal, learned Counsel appearing on behalf of the petitioner, the Supreme Court followed its earlier judgment in Anand Nishikawa Co. Ltd. v. CCE [2005] 7 SCC 749 and held that it was settled law that mere failure to declare would not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression. On a perusal of the show cause notice there is no allegation of any conscious act on the part of the petitioner that constitutes fraud, collusion, wilful mis-statement, suppression of facts or contravention of any of the provisions of the Finance Act, 1994 or any rule made thereunder with intent to evade service tax. The petitioner was duly registered with effect from the year 2007. The dispute is only with regard to service tax allegedly payable on the premium received during the period in question. Prima facie there is substance in Mr. Mittals submission that in view of the Delhi High Court judgment in Home Solution Retail (India) Ltd.s case (supra) holding that service tax was not payable on rent of immovable property per se, the petitioner was not liable for rent on premium. In any case, prima facie there was some confusion as to whether renting per se was taxable for which the law had to be amended. The petitioner was under the impression that no service tax would be payable on premium and/or salami, on its interpretation of the law, which was a possible interpretation accepted by the Delhi High Court in Home Solution Retail (India) Ltd.s case (supra). The next question is whether this Court should at all interfere with a show cause notice. It is well settled that existence of an alternative remedy is not in itself a bar to entertaining a writ petition. A writ petition can certainly be entertained when a notice is impugned as without jurisdiction. There can be no dispute that a question of limitation is a question of jurisdiction and that the Commissioner has no authority to issue notice after the period of limitation prescribed in the Finance Act, 1994. In Raza Textiles Ltd. v. ITO AIR 1973 SC 1362, the Supreme Court held that no authority, much less a quasi judicial authority, could confer jurisdiction on itself by deciding the jurisdictional fact wrongly. The question of whether the jurisdictional fact had rightly been decided or not was a question open to examination by the High Court in an application under Article 226 of the Constitution of India. In Raza Textiles Ltd.s case (supra) the Supreme Court held that where the Income Tax Officer had assumed jurisdiction by deciding a jurisdictional fact erroneously, the assessee would be entitled to a writ of certiorari as prayed for, since it was incomprehensible to think a quasi-judicial authority could erroneously decide a jurisdictional fact and impose a levy. In Shrisht Dhawan v. Shaw Brother [1992] 1 SCC 534 the Supreme Court followed its earlier judgment in Raza Textiles Ltd.s case (supra) and reiterated the proposition that a Court or Tribunal cannot confer jurisdiction to itself by deciding a jurisdictional fact wrongly.

In Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), Companies District I, Calcutta & Anr. reported in AIR 1961 SC 372, a Constitution Bench of the Supreme Court held that where the action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, would issue appropriate orders or directions to prevent the same. In Calcutta Discount Co. Ltd.s case (supra) the Constitution Bench of the Supreme Court held the expression reason to believe postulates belief and the existence of reasons for that belief. The belief must be held in good faith; it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income Tax Officer. The forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer. If it be asserted that the Income Tax Officer had reason to believe that income had been under-assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The expression therefore predicates that the Income Tax Officer holds the belief induced by the existence of reasons for holding such belief. In other words the Income Tax Officer must on information at his disposal believe that income has been under-assessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, may not be based on mere suspicion . It must be founded upon information. On a parity of reasoning where the Commissioner finds that there are reasons to believe that service tax has not been levied or paid or has been shortlevied or short paid or erroneously refunded by reason of fraud; or collusion; or wilful mis-statement; or suppression of facts; or contravention of any of the provisions of this chapter or of the rule made thereunder with intent to evade payment of service tax by the person chargeable with the service tax or his agent, the Commissioner is bound to disclose the reasons for formation of such belief. Be it noted that mere contravention of provision of Chapter V or Rules framed thereunder does not enable the Service Tax Authorities to invoke the extended period of limitation. The contravention necessarily has to be with intent to evade payment of service tax. On a prima facie, perusal of the impugned notice it prima facie appears to this Court that the Commissioner proceeded on the basis that there had been contravention, as a result of which, some tax payable had not been paid. Prima facie, the Commissioner of Service Tax did not address the issues, which were required to be addressed, for issuing a notice by invoking the extended period of limitation. Moreover, whether service tax is payable on premium for a long term lease is a question of law. The petitioners have an arguable case. The question of law would necessarily have to be decided by this Court. 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. It is made clear that all the above observations are prima facie observations and will not sway the final decision of the writ application. There will accordingly, be an interim order restraining the respondents from giving effect and/or further effect to the impugned show-cause notice till

21st December, 2012 or until further orders whichever is earlier. Affidavit-in-opposition to the writ application be filed within 19th October, 2012. Affidavit-in-reply thereto, if any, be filed within 19th November, 2012. The writ application be listed for hearing on 27th November, 2012.

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