2015 (3) TMI 964 - AT - Service Tax

Court rules prospective application of amendment to Finance Act, clarifies liability for interest on taxable services.

The court allowed the appeal, ruling that the addition to Explanation (c) under Section 67 of the Finance Act, 1994, is prospective from 10.05.2008. ... Demand of service tax on suspense account - Amendment to section 67 will be prospective i.e. w.e.f. 10.05.2008 or retrospective - addition reading as 'any amount credited or debited, as the case may be, to any account, whether called 'Suspense account' or by any other name - amount relating to transaction with associated enterprises - Held that:- Law is well settled that amendment to law can be made retrospectively even bringing an amendment to an Explanation appearing in the statute. But the nature and character of the amendment decides whether such amendment is declaratory or clarificatory and accordingly whether retrospective or not. A declaratory law is always prospective while clarificatory law is retrospective in nature. It is also well settled law that statute making amendment to the effect of declaration of liability is not normally retrospective unless otherwise such intention expressed by legislature or by necessary implication intended to be so. Addition to the Explanation (C) to sub-section (4) of Section 67 with the proposition 'and' throws light on the nature and character of both the clauses thereof. It categorically brings out that recording of transactions in two different pattern was enacted from two different dates. Therefore, the addition to the Explanation (C) with effect from 10.05.2008 is prospective in nature and that addition shall be applicable from the day that was enacted in the statute book. Accordingly, there shall be no liability to levy of interest on the gross value of taxable service relating to the period prior to that date. - Decided in favour of assessee. Issues:Whether the addition to Explanation (c) under Section 67 of the Finance Act, 1994, brings the nature of debit or credit of any amount relating to transactions with associated enterprises to the fold of taxation retrospectively i.e., prior to 10.05.2008.Analysis:The judgment in this appeal revolves around the question of whether the addition made to Explanation (c) under sub-section (4) of Section 67 of the Finance Act, 1994, retroactively imposes taxation on amounts credited or debited in accounts related to transactions with associated enterprises before 10.05.2008. The court refers to the case of Union of India Vs Martin Lottery Agencies Ltd. to provide guidance on this matter. The addition to the explanation was first recognized in law from 10.05.2008, altering the determination of liability concerning the gross value of taxable services provided to associated enterprises.The court delves into the principles of retrospective amendments to the law, distinguishing between declaratory and clarificatory amendments. It is established that a declaratory law is prospective, while a clarificatory law is retrospective. The nature and character of the amendment, as well as the intention expressed by the legislature, determine whether an amendment is retrospective. In this case, the addition to Explanation (c) with the term 'and' signifies a prospective nature, indicating that the recording of transactions in two different patterns was enacted from different dates. Therefore, the addition to Explanation (c) from 10.05.2008 is deemed prospective and applicable from the enactment date, relieving any liability for interest on the gross value of taxable services before that date.Consequently, the appeal is allowed based on the retrospective nature of the amendment to Explanation (c) under Section 67, leading to the conclusion that there is no liability to levy interest on the gross value of taxable services for the period preceding 10.05.2008. The judgment is pronounced in open court, bringing clarity to the issue at hand.