2013 (5) TMI 57 - AT - Service Tax

Service tax disputes resolved: retrospective amendments, tax recovery, and past liabilities addressed.

KISAN SAHKARI CHINI MILLS Versus COMMISSIONER OF SERVICE TAX, NOIDA

The case involved disputes regarding the payment of service tax by service receivers, the validity of retrospective amendments, interpretation of tax ... Services rendered by goods transporters - Service tax demanded from the Appellant as receiver of the service as per provisions of Rule 2(d)(xvii) of the Service Tax Rules, 1994, during the period 16-11-1997 to 2-6-1998 - whether the retrospective amendments made were good enough for collecting the tax liability from the service receivers who did not file any returns and did not pay the tax - Held that:- As decided in CCE v. Eimco Elecon Ltd. [2010 (7) TMI 477 - GUJARAT HIGH COURT] till the point of time Section 73 of the Finance Act, 1994 came to be substituted w.e.f. 10-9-2004 provisions of the said section could not be made applicable despite retrospective amendment in Sections 68 and 71A of the Finance Act, 1994. In these circumstances, admittedly, the assessee could not be faulted with for not having filed a return after getting himself registered. More particularly, when one considers the language employed in the Proviso below sub-section (1) of Section 68 and the provisions of Section 71A of the Finance Act, 1994, it is not possible to state that the language of the Statute is so clear that any default can be fastened on the respondent-assessee. Thus following the decisions of the High Courts as cited above and hold that the demands issued after in 2004 or later in respect of the short levies in dispute in the three cases filed by assessees are not maintainable. Issues Involved:Payment of service tax by service receivers under Rule 2(d)(xvii) of the Service Tax Rules, 1994; Validity of retrospective amendments for collecting tax liability from service receivers; Interpretation of Section 73 of the Finance Act, 1994; Applicability of Section 71A for recovery of unpaid taxes; Conflict in decisions regarding demands issued after 10-9-2004; Bar on limitation for demands issued in 2004 for the period 16-11-1997 to 2-6-1998.Issue 1: Payment of service tax by service receivers under Rule 2(d)(xvii) of the Service Tax Rules, 1994:The case involved a dispute regarding the payment of service tax on services rendered by goods transporters, demanded from the appellant as the receiver of the service as per Rule 2(d)(xvii) of the Service Tax Rules, 1994. The issue was whether the retrospective amendments made by the Parliament were sufficient to collect tax liability from service receivers who did not file returns or pay taxes during the relevant period. The matter was previously decided by two High Courts and the Apex Court, with reference to the case of Laghu Udyog Bharati, which held Rule 2(d)(xvii) as ultra vires.Issue 2: Validity of retrospective amendments for collecting tax liability from service receivers:To address the defect highlighted by the Apex Court in Laghu Udyog Bharati case, the Parliament made retrospective amendments through the Finance Act, 2000, validating actions taken under the rule regardless of court judgments. The question arose whether this amendment empowered the issuance of demands under Section 73 of the Finance Act, 1994 on service receivers who did not pay taxes during the relevant period. The dispute centered around the lack of requirement for such service receivers to file returns or disclose information during that period.Issue 3: Interpretation of Section 73 of the Finance Act, 1994:The amendment to Section 73 by the Finance Act, 2004 made it applicable without specifying the section under which returns were to be filed. This led to conflicting decisions on whether recovery provisions applied to short levies for which Show Cause Notices were issued after 10-9-2004. The matter was referred to the Larger Bench of the Tribunal, which held that Show Cause Notices issued post-amendment were sustainable.Issue 4: Bar on limitation for demands issued in 2004 for the period 16-11-1997 to 2-6-1998:Despite the Tribunal's decision, various High Courts held that demands issued in 2004 for liabilities from the period 16-11-1997 to 2-6-1998 were time-barred. Citing cases like Precot Mills, Eimco Elecon Ltd., and Hiran Aluminium Ltd., the High Courts emphasized that until the substitution of Section 73 in 2004, the provisions could not be applied retroactively, thus rendering the demands unsustainable.In conclusion, the judgment addressed complex issues surrounding the payment of service tax by receivers, the validity of retrospective amendments, the interpretation of tax recovery provisions, and the limitation on demands for past liabilities. The decision, following the High Courts' rulings, set aside the impugned order and allowed the appeal, emphasizing the importance of respecting judicial hierarchy in resolving legal disputes.