Article 19(1)(g): Levy of service-tax on Advocates is constitutional
A Writ Petition was filed to challenge the levy of service-tax on advocates. It was claimed that an advocate renders services which cannot be said to be commercial or business like. They cannot be equated with the service providers mentioned in the Finance Act 1994. It was also contended that advocacy is not a business but a profession and a noble one. An advocate is a part and parcel of the administration of justice and which is a sovereign or regal function and hence providing for a Service Tax on advocates would mean that their services will no longer be available or accessible to those seeking justice from a Court of law. That would defeat the constitutional guarantee of free, fair and impartial justice. HELD by the High Court dismissing the Petition:
(i) The legislature has neither interfered with the role and function of an advocate nor has it made any inroad and interference in the constitutional guarantee of justice to all. The services provided to a individual client by a individual advocate continues to be exempted from the purview of the Finance Act and consequently Service Tax but when an individual advocate provides service or agrees to provide services to any business entity located in the taxable territory, then, he is included and liable to pay Service Tax. The classification between those who can afford professional legal services and are ready to pay the fees or charges demanded without seeking any reduction or concession and those who cannot pay legal fees but can at best bear meagre expenses has been made. This classification has a reasonable nexus with the object sought to be achieved.
(ii) The economic realities are that even, legal services are rendered in an organized manner. When advocates group or organize themselves by making huge investments in acquiring immovable properties for professional work, heavy overheads, in the form of clerical and support staff, with facilities of cabins or rooms, then, legal services are rendered to organized groups or business entities predominantly. These persons can very well pay the fees and charges without any demur or complaint;
(iii) What holds good for chartered accountants and architects must equally apply to other professionals such as advocates, and who too are well conscious of their status.
S. 45/ 48: Gains on sale of TDR received as additional FSI as per the D. C. Regulations has no cost of acquisition and is not chargeable to capital gains
Only an asset which is capable of acquisition at a cost would be included within the provisions pertaining to the head "Capital gains" as opposed to assets in the acquisition of which no cost at all can be conceived. In the present case as well, the situation was that the FSI/TDR was generated by the plot itself. There was no cost of acquisition, which has been determined and on the basis of which the Assessing Officer could have proceeded to levy and assess the gains derived as capital gains. It may be that subsection (2) of section 55 clause (a) having been amended, there is a stipulation with regard to the tenancy rights. However, even in the case of tenancy right, the view taken by the Hon'ble Supreme Court, after the provision was substituted w.e.f. 1st April, 1995, is as above. The further argument is that the tenancy rights now can be brought within the tax net and in the present case the asset or the benefit is attached to the property. It is capable of being transferred. All this may be true but as the Hon'ble Supreme Court holds it must be capable of being acquired at a cost or that has to be ascertainable. In the present case, additional FSI/TDR is generated by change in the D. C. Rules. A specific insertion would therefore be necessary so as to ascertain its cost for computing the capital gains. Therefore, the Tribunal was in no error in concluding that the TDR which was generated by the plot/property/land and came to be transferred under a document in favour of the purchaser would not result in the gains being assessed to capital gains.
Once reasonable cause is established, no penalty is imposable
Once reasonable cause is established, no penalty is imposable – Section 80 of the Finance Act, 1994 does not provide for imposition of reduced quantum of penalty
Commissioner of Central Excise & Customs, Gujarat Vs. V.M. Engg. Works [(2014) 52 taxmann.com 11 (Gujarat)]
V.M. Engg. Works (the Assessee) made late payment of Service tax, consequent to which a Show Cause Notice was issued to the Assessee proposing to impose penalty for late payment of Service tax under Section 76 of the Finance Act, 1994 (the Finance Act). The Show Cause Notice was adjudicated whereby the Adjudicating Authority imposed a penalty of Rs. 22,200/- under Section 76 of the Finance Act for late payment of Service tax. Later on, the Ld. Commissioner (Appeals) reduced the amount of penalty of Rs. 22,200/- imposed under Section 76 of the Finance Act to Rs. 8,000/- by invoking Section 80 of the Finance Act.
Being aggrieved, the Revenue preferred an appeal before the Hon'ble CESTAT arguing that penalty cannot be reduced below the minimum specified under Section 76 of the Finance Act but did not succeed. Thereafter, the Revenue filed an appeal before the Hon'ble High Court of Gujarat. The Assessee argued that since Section 80 of the Finance Act was held applicable, entire penalty was liable to be set aside.
The Hon'ble High Court of Gujarat relying upon its decision in the case of CCE & C Vs. Port Officer [Tax Appeal No. 1367 of 2009 dated July 8, 2010] ("Port Officer
case") held that Section 80 of the Finance Act overrides Section 76 thereof and provides that no penalty shall be imposable, if Assessee proves that there was reasonable cause for failure to pay Service tax. Whether a reasonable cause exists or not is primarily a question of fact and onus thereof is on the Assessee but once reasonable cause is established, no penalty is imposable.
The Hon'ble High Court further held that Section 80 of the Finance Act does not provide that even upon establishment of reasonable cause, a reduced quantum of penalty is imposable. Hence, matter was remanded back to the Tribunal for fresh disposal in view of the decision held in the Port Officer case.
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Once reasonable cause is established, no penalty is impo... Once reasonable cause is established, no penalty is imposable - Section 80 of the Finance Act, 1994 does not provide for imposition of reduced quantum of... | |||||||
Extended period not invocable when penalties waived off on the ground of interpretational issue
Sankhla Udyog Vs. Commissioner of Central Excise & Service Tax, Jaipur [(2014) 51 taxmann.com 264 (New Delhi – CESTAT)]
In the instant case, Sankhla Udyog (the Appellant) was engaged in rendering Repairs and Maintenance Services. A Show Cause Notice was issued to the Appellant by invoking the extended period alleging that there was a difference between the amount shown in their ledger and in the Service Tax Returns (ST-3) on which the Appellant had not paid Service tax and the same was liable to be recovered along with interest and penalty.
The Appellant contended that prior to June 16, 2005, Repair service other than under a Maintenance contract was not liable to Service tax and thereafter, they became eligible for Small Scale Exemption under the erstwhile Notification No. 6/2005-ST dated March 1, 2005 effective from June 16, 2005. Further, the difference between the figures shown in the ledger and in the ST-3 occurred because in the ledger the figures were shown on accrual basis whereas in ST-3 the figures were shown on actual realization basis and that there had been no suppression or wilful mis-statement on their part.
However, the Adjudicating Authority confirmed demand on the Appellant by invoking extended period but waived off penalties under Section 80 of the Finance Act, 1994 ("the Finance Act") on ground that there was interpretation of law involved.
Being aggrieved, the Appellant preferred an appeal before the Hon'ble CESTAT, Delhi, inter alia, questioning invocation of extended period when penalty was waived off under Section 80 of the Finance Act on the ground of interpretation of law being involved.
The Hon'ble CESTAT, Delhi held that when benefit of Section 80 of Finance Act has been extended for not imposing any penalty, it clearly shows that the ingredients required for invoking extended period are not present in the instant case. Indeed in the entire
Adjudication Order there is no word as to how the extended period is invocable. Hence, the extended period is not invocable.
It was further held by the Hon'ble Tribunal that once the Appellant explained the reason for mismatch between the figures of their ledger and in their ST-3 return, a clear finding was required to be given by the Adjudicating Authority instead of brushing it aside on the ground that it was not possible to verify their claim.
Hence, the Adjudicating Order was set aside and matter was remanded back to decide the same afresh but without invoking the extended period.
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