2008 (6) TMI 97 - AT - Service Tax

Applicant Ordered to Pay Rs. 15 Lakhs for Service Tax Violation

The Tribunal ruled that the applicant must deposit Rs. 15 lakhs within eight weeks, in addition to the amount already paid, as the club services were ... Service of club and association - prospective operation of taxation statute - waiver of pre-deposit in appeal - tax liability for services rendered after chargeability dateService of club and association - prospective operation of taxation statute - tax liability for services rendered after chargeability date - Whether service tax is leviable on amounts relating to club services provided after the service became chargeable - HELD THAT: - The Tribunal recorded that the service of club and association was brought within the service tax net effective 16-6-2005. The admitted fact that the club began functioning and services were provided with effect from 4-9-2006 means that services were rendered after the date on which the tax was chargeable. The applicant's contention that receipts antecedent to 16-6-2005 escape liability was not accepted in view of the fact that the taxable service was in fact provided on or after 4-9-2006. The Tribunal therefore held prima facie that the demand for service tax in respect of services rendered after 4-9-2006 is not unsustainable merely because some amounts had been received earlier, and that the provision bringing the service within charge having effect from 16-6-2005 renders services provided thereafter taxable.Demand for service tax in respect of club services provided from 4-9-2006 is prima facie sustainable.Waiver of pre-deposit in appeal - Whether the pre-deposit should be wholly waived pending appeal - HELD THAT: - Having found that the service was provided after the chargeability date and that the demand was prima facie sustainable, the Tribunal concluded the case was not fit for total waiver of the pre-deposit. In the exercise of its discretion the Tribunal directed a part pre-deposit: the applicant, having already deposited a specified amount, was ordered to deposit an additional sum within eight weeks; upon such deposit the balance of the pre-deposit requirement and penalties would be waived. The order conditions the grant of partial waiver on the specified deposit and required reporting of compliance on the next date.Total waiver refused; conditional partial waiver granted subject to deposit of the directed amount within the time stipulated.Final Conclusion: The Tribunal held that services rendered by the club from 4-9-2006 are prima facie taxable (service of club and association being chargeable from 16-6-2005) and refused full waiver of pre-deposit; instead a conditional partial waiver was granted upon payment of the directed deposit within the prescribed period. Issues: Application for waiver of pre-deposit of service tax and penalties based on the timing of service provision and receipt of amounts.Analysis:1. The applicant sought waiver of pre-deposit of Service tax and penalties amounting to Rs. 70,47,618, as the demand was confirmed due to providing club and association services. The applicant argued that since the amount was received before 16-6-2005 and the service tax provisions for club services were effective from that date, the demand was not sustainable. Citing a Supreme Court decision, the applicant contended that statutes are prima facie prospective unless expressly made retrospective, thus the demand should not apply.2. The Revenue countered that although amounts were received before 16-6-2005, the club services were provided starting from 4th September 2006 when the club commenced operations. Therefore, the Revenue asserted that as services were rendered after 4th September 2006, the applicant was liable to pay Service tax as per the existing provisions on that date. The Revenue clarified that they were not claiming the tax demanded to be retrospective in nature.3. The Tribunal noted that the club began operations on 4th September 2006 and since the service of club was subject to Service tax from 16-6-2005, the case did not warrant a total waiver of the Service tax amount. The Tribunal directed the applicant to deposit Rs. 15 lakhs within eight weeks, in addition to the amount already paid. Upon compliance with this directive, the pre-deposit of the remaining Service tax and penalties would be waived. The case was adjourned for compliance reporting on 13-8-2008.