Service Tax payment for SERVICE TAX NOT RECEIVED ??

[hardik thacker]

Sir,

OUR ORGANIZATION IS SEMI GOVERNMENT ORGANIZATION (LOCAL AUTHORITY).MOST OF THE LANDS IN TOWN ARE OWNED BY OUR ORGANIZATION AND ALLOTED TO VARIOUS PARTIES FOR LONG TERM OR SHORT TERM

THE CHANG IN THE LEASE RENT RATE HAS BEEN TAKE EFFECT WITH APPROVAL OF 'TAMP' (TARIFF AUTHORITY OF MAJOR PORT) .HOWEVER PARTIES ARE PAYING LEASE RENTAL AS PER LEASE DEED ENTERED LONG BACK.HENCE THE MATTER IS IN LITIGATION.

AT PRESENT OUR ORGANIZATION IS RAISING INVOICE AS PER NEW RATES AND PAY SERVICE ON THAT AS PER THE RULES OF SERVICE TAX.HOWEVER WE ARE NOT RECEIVING EVEN MAIN AMOUNT.

DUE TO ABOVE WE INCURRED HUGE LOSS FOR PAYMENT OF SERVICE FOR WHICH EVEN SERVICE VALUE ITSELF IS NO RECEIVING

IS THERE ANY REMEDY FOR SAVING FROM PAYING SERVICE TAX 'OUT OF POCKET'

THANKS......

[KASTURI SETHI]

Hardik Thacker Ji,

ONLY REMEDY IS CHALLENGING CONSTITUTIONAL VALIDITY OF POT RULES OR DEFINITION OF 'CONSIDERATION' UNDER SECTION 67 OF THE FINANCE ACT.

Other Option : Though you can say for the time being, you are paying ST from,"Out of pocket", yet it is not so. When the amount including ST has been billed and invoice has been raised to the Service Recipient, sooner or later you will receive the whole amount including ST along with interest from the service recipient as soon as litigation is over. However, in case, later on you find that there is difference resulting in excess payment, you can file refund claim which will not be hit by time bar limit because the matter is sub judice. Moreover, ST paid in excess without authority of law will be treated as 'colour of amount or deposit'. Section 11 B of CE Act will not be applicable.

At present you are going as per Service Tax law.

[hardik thacker]

Thank you respected sethi sir, which option you would recommend.whether we should challenge constitutional validity or wait for litigation comes to end.The amount involved is considerable.

[KASTURI SETHI]

Dear Hardik Thacker,

First preference is to wait for the conclusion of litigation. Make all-out efforts to get early hearings and get the case decided at the earliest. Being a huge amount locked up in court proceeding, you can request the Court officially for early decision in the interest of revenue/Gujarat State. It is also in public interest.

Second preference is to challenge the constitutional validity of POT rules and interpretation of 'CONSIDERATION'. As per statutory provisions of Finance Act, Service Provider is to collect ST from the recipient and deposit into Central Govt. account. When gross amount is not in your hand for a longer period and ST is too being paid from pocket, there is possibility of winning by way of challenging constitutional validity but Court Proceeding consume a lot of time. It may take years. So better option is to wait for the end-result of litigation. I think you will be successful in getting decided the litigation at the earliest. So follow the first option.

AI Summary

Service tax on unpaid invoices: deposit duty remains; recover tax via litigation or pursue refund after subjudice protection. Service providers invoicing revised lease rentals but not receiving the gross amounts must nonetheless deposit service tax, while core disputes concern the definition of consideration and validity of Point-of-Tax rules. Recommended remedies are to expedite the underlying litigation to recover billed amounts (including tax and interest) and thereafter claim refunds for any excess tax paid-refund claims are not time-barred while matters are sub judice-or alternatively to mount a constitutional challenge to the POT rules or definition of consideration, recognizing such challenges may be protracted.