service tax on renting service - inputs from experts.
We do not where is the solution with stays and stays on stays. The hapless tenants who bear the brunt of conservative landlords, the hapless landlords who cannot fight the big retailers who refuse to pay, some tenants willing to and paying for the past years. The tax payers confusion due to so many alternatives lead to diverse practices some ethical/ other unethical.
Now we understand that the revenue has started raising the demand selectively in some parts of the country. Whether the demand beyond 1 year can stand???
The levy has been full of legal tangles and courts have held either way. It can be said without doubt that the matter is unclear and tenants are/ were not willing therefore there cannot be any mala fide intention. Consequently demands if any should not exceed 1 year from the date of the notice.
Therefore the choices available are: pay ST under protest with interest for the past year and going forward and litigate for the past demand; alternative if client is willing to avail the credit of the ST, pay under protest the entire amount with interest and litigate the matter. In case of favourable decision claim the interest as refund; another alternative is that since the matter has not reached finality do not pay- litigate till matter clear.
Other experts may join in a show the way forward/ comment on the above
Madhukar N Hiregange
Mr.Balasubramanian Natarajan suggests : I feel , looking at the past happenings in other services, It is likely the impugned services will be made to suffer tax.
In such an eventuality, I feel it is better to pay under protest along with interest and litigate. The service provider to inform the tenants that the liability will be passed on to them alongwith interest in case it is held to be payable.
My senior Mr. Rakesh Chitkara, Advocate is of the opinion : Don't pay to Department. You will never get refund.
Mine and Ms. Rebecca's reading about Mr. Natraj Bala is that he is a simple person by heart despite his profession. His only fault is that he is an optimist.
When Delhi High Court decided against Govt., in 2009, a large number of assessees claimed refund. Not a single person has got the refund anywhere in india, not just Delhi. All claims have been rejected en-masse on one pretext or the other.
Most sensible option is : Pay only when there is no other option, and with interest.
Payment with interest is a better alternative than claiming refund, where even if you ultimately succeed, you will have to wait for a long time and only after “Namaste”, which may be more than 18% interest (for period upto 1.4.11 - 13%). This does not include the number of trips you will have to make to their office to fulfill 'deficiencies' of papers in the claim.
It is also an admitted fact that no refund is sanctioned in Excise Department without first issuance of a Show Cause Notice, its reply by the assessee followed up with Personal Hearing after mostly engaging a Consultant /Advocate. All this will cost more money.
Now comes the penalty part : Yes there is to be levied a penalty u/s 76, being equal to the amount of tax not paid / late paid, subject to number of days. This penalty can be waived u/s 80 if there is a "reasonable cause".
What better reasonable cause than that the matter was under prolonged litigation, and different courts were passing different and often contradictory orders; that the legality had been struck down by a High Court; that the Govt. had to bring a retrospective validation legislation to protect the collection already made.This argument has such a strong force that I expect that the Govt., if it wins, may come out with an announcement providing a window (of say 3 months) for the assessees to pay the tax with interest when no penalty would be levied on those who pay within the extended time period.
Mind you, this has happened before also. After the Architects lost their cases in theBombay High Court and Gujarat High Court (WP Nos. 1174/2000 & SCA No.7220/1999 , respectively) against levy of Service Tax, then on a representation having been made by their Institute, the CBEC granted them 3 months time to pay up without penalty.