Madras High Court
V.S.Ekambaram vs The Assistant Commissioner Of Gst And on 13 September, 2024
Author: C.Saravanan
Bench: C.Saravanan
W.P.No.9562 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 13.09.2024
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.No.9562 of 2022
and W.M.P.No.9293 of 2022
1.V.S.Ekambaram
2.V.E.Gayathri ... Petitioners
vs.
The Assistant Commissioner of GST and
Central Excise,
Office of the Assistant Commissioner of GST and
Central Excise,
Maraimalai Nagar Division,
Plot No.40, Ranga Colony, Rajakilkpakkam,
Chennai 60 073. .. Respondent
Prayer : Petition is filed under Article 226 of the Constitution of India to
issue a Writ of Certiorari, calling for the records in proceedings
C.No.V/18/106/2020-ST RF in Order in Original No.8/2022 dated
24.02.2022, passed by the respondent and to quash the same.
For Petitioners : Mr.Joseph Prabkar
For Respondent : Mr.T.Ramesh Kutty
Senior Standing Counsel
Assisted by Mr.B.Sivaraman
Junior Panel Counsel
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1/7
W.P.No.9562 of 2022
ORDER
The petitioners are before this Court against the impugned Order
in Original No.8/2022 dated 24.02.2022. By the impugned order, the
proposals in the Show Cause notice, which preceded the impugned order
has been confirmed. Operative portion of the impugned order reads as
under:-
“5.6. The lessors have submitted that two of their
tenants M/s.Sundaram BNP Paribas and
M/s.Source HOV did not pay them service tax
and hence the rent received from them should be
considered as cum tax value and the service tax
dues should be worked out accordingly. In this
connection it is seen that the Show Cause Notice
does not allege that the lessors have charged and
collected service tax and did not discharge the
same. Further, from the email received by the
lessor from M/s.Source HOV it is evident that
they have refused to pay service tax on rent for
the past period (copy of correspondence
produced by the lessors). In r/o. M/s.Sundaram
BNP Paribas Ltd they have vide letter dated
10.02.2022 declared that they have not paid the
service tax for the period June 2010 to December
2013. As per Section 67(2) of the Finance Act,
1994.
'(2) Where the gross amount charged by a
service provider, for the service provided or to
be provided is inclusive of service tax payable,
the value of such taxable service shall be such
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amount as, with the addition of tax payable, is
equal to the gross amount charged'.
In judgments by various Courts it has been
held that where the assessee has not collected
service tax from their customers then amount
collected need to be taken as cum-tax value and
correspondingly the service is required to be
recomputed.
Hence, I accept this contention of the
assessee that the rent collected is to considered
as cum tax value in r/o rent received from
M/s.Source HOV and M/s.Sundaram BNP
Paribas.”
2. The dispute had arisen on account of levy of service tax on
renting of immovable property. The petitioners failed to discharge the
service tax liability after collecting the same from the lessee as is evident
from the operative portion of the impugned order which stands extracted
above. By the impugned order penalty has been imposed under Section
77 of the Act, for a sum of Rs.10,000/- on each of the petitioners and
100% penalty under Section 78 of the Finance Act, 1994. It appears that
the petitioners had also earlier challenged the Show Cause Notice in
W.P.No.26356 of 2014. The writ court had dismissed the same vide
order dated 10.2.2021.
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3. Aggrieved by the same, the petitioners had filed W.A.No.1837
of 2021. By an order dated 20.10.2021, the said writ appeal was
dismissed holding that the Court was not inclined to interfere with the
order of the learned Single Judge of this Court dated 10.02.2021,
pursuant to which the impugned order was passed.
4. The learned counsel for the respondent would submit that the
writ petition is devoid of merits as the petitioners have an alternate
remedy.
5. The learned counsel for the respondent further states that the
petitioners delayed adjudication of the Show Cause Notice by filing a
writ petition before this Court in W.P.No.26356 of 2014, which was
eventually dismissed by this Court on 10.02.2021 .
6. It is submitted that even though the respective petitioners had
deposited the disputed tax there is no embargo on the department to levy
penalty under Section 78 of the Finance Act, 1994.
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7. The only dispute that arises for consideration is whether the
petitioners can be subjected to penalty under Section 78 of the Finance
Act, 1994?
8. As there have been multiple challenges to the levy of service
tax on renting out of immovable property before various High Courts.
High Courts have dismissed the writ petitions filed challenging the
provisions of the Finance Act, 1994 seeking to levy service tax on
renting of immovable property.
9. The issue is now pending before the Hon'ble Supreme Court.
The Hon'ble Supreme Court has granted interim stay of all recovery
proceedings subjected the lessees depositing 50% of the tax.
10. Heard the learned counsel for the petitioners and the learned
Senior Counsel for the respondent.
11. This Court is inclined to confirm the payment of service tax
and appropriation of the same vide impugned order. Since the vires of
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levy of service tax on renting of immovable property is still pending
before the Hon'ble Supreme Court and temporary relief has been granted
to various lessee subject to deposit 50% of the service tax due demand,
the Court is inclined to set aside the impugned order in so far as
imposition of penalty under Sections 77 and 78 of the Finance Act, 1994
and remits the case back to the respondent to await for the orders of the
Hon'ble Supreme Court and pass orders on merits in so far as penalty and
adjudicate the same in terms of Section 78 of the Finance Act, 1994.
12. This writ petition stands disposed of. No costs. Consequently,
connected miscellaneous petition is closed.
13.09.2024
Index : Yes/ No
Internet : Yes/No
Neutral Citation : Yes/No
kkd
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C.SARAVANAN, J.
kkd
To
The Assistant Commissioner of GST and
Central Excise,
Office of the Assistant Commissioner of GST and
Central Excise,
Maraimalai Nagar Division,
Plot No.40, Ranga Colony, Rajakilkpakkam,
Chennai 60 073.
13.09.2024
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