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April 2021

Service Tax

By Puloma Dalal | Jayesh Gogri | Mandar Telang
Chartered Accountants
Reading Time 11 mins

I. HIGH COURT

1. [2021] 125 taxmann.com 197 (Guj) Deepak Print vs. UOI Date of order: 9th March, 2021

The Gujarat High Court ordered that rectification of GSTR3B be permitted to the assessee. Also ordered not to levy late fees hoping that such unnecessary litigation would be avoided in future

FACTS
The writ applicant while submitting the GSTR3B return in May, 2019 inadvertently uploaded the entries of M/s Deepak Process instead of M/s Deepak Print. It, therefore, made an application to the Nodal Officer for allowing it to edit the figures and off-set the correct liabilities and to re-submit the said return. Failing to get the appropriate response from the authority concerned, the applicant filed a writ before the Gujarat High Court.

HELD
The Court noted that the short question in the writ was whether the applicant was entitled to seek rectification of Form GSTR3B for the month of May, 2019. Relying on the decision of the Delhi High Court in the case of Bharti Airtel Limited vs. Union of
India & Ors., Writ Petition (Civil) No. 6345 of 2018
, the Court held that the applicant should be permitted to rectify the Form GSTR3B in respect of the relevant period. It further ordered that since it had been dragged into unnecessary litigation only on account of technicalities, it should not be saddled with the liability of payment of late fees. The Court also expressed the hope that the applicant may not have to come back to it on any further technicalities that the Department was in the habit of raising and thereby resulting in unnecessary litigation.

2. [2021] 125 taxmann.com 241 (Bom) Skoda Auto Volkswagen India (P) Ltd. vs. Commissioner (Appeals) Date of order: 12th March, 2021

As per section 9(1) of the General Clauses Act read with section 85(3A) of the Finance Act, 1994, if the order was received on 30th August, 2019 the extended period of three months for filing an appeal would end on 1st December, 2019 and not on 30th November, 2019 because there are ‘no 31 days’ in November and the word ‘to’ is not used in section 85(3A) to cap the limitation period to 30th November, 2019. Further, when the period for filing of appeal expires on a Sunday and the said appeal is dispatched by Speed Post on the immediate next working day, then the appeal is said to have been filed within the period of limitation

FACTS

The petitioner had filed a service tax appeal before the Commissioner (Appeals) against the adjudicating order dated 8th July, 2019. The order was dispatched on 29th August, 2019 and was received on 30th August, 2019. On 29th November, 2019 the petitioner made a mandatory pre-deposit u/s 35F of the Central Excise Act. It had also dispatched its appeal to the Commissioner (Appeals) which was received by him on 4th December, 2019. The limitation period for filing such an appeal is two months extendable by another one month, a total of three months. The three months’ period had lapsed on 30th November, 2019 which was a Saturday. Therefore, the appeal was dispatched by the petitioner immediately on the following Monday, 2nd December, 2019, being the next working day. The petitioner also sent an application dated 5th December, 2019 to the Commissioner (Appeals) requesting the latter to condone the delay in presenting the appeal, if any, which was received by him on 9th December, 2019. The Commissioner (Appeals) held that the appeal was filed beyond the extended period of limitation and since as per the decision of the Apex Court in the case of Singh Enterprises vs. Commissioner of Central Excise, 2008 (221) ELT 163 he had no power to condone the delay beyond the period of one month after the normal period of limitation of two months, the appeal was found to be time-barred. Accordingly, the application for condonation of delay was rejected and the appeal was dismissed. Aggrieved by the same, the applicant filed the writ petition before the High Court.

HELD
The High Court noted that since the matter relates to a service tax appeal, the provisions of section 85 of the Finance Act would be of relevance. Section 85(3A) of the Finance Act is in pari materia to the provisions relating to filing of an appeal in matters of Central Excise and uses the word ‘presented’ and not ‘filed’. In other words, the appeal is to be presented and not filed. It also noted that while u/s 35 of the Central Excise Act, 1944 the limitation period is 60 days from the date of communication, extendable by another period of 30 days, in section 85(3A) of the Finance Act, 1994 the limitation period for presentation of appeal is two months from the date of receipt of the decision or order, extendable by a further period of one month.

The Court held that there is no dispute on the proposition that section 5 of the Limitation Act, 1963 would stand excluded when the statute itself provides the limitation period for filing of appeal as well as the period beyond the limitation period within which the delay in filing the appeal can be condoned. Noting the differences between the provisions of the Central Excise Act and the Finance Act as mentioned above, it held that as per sub-section (35) of section 3 of the General Clauses Act, the word ‘month’ has been defined to mean a month reckoned according to the British calendar. The Court referred to the decision of the Supreme Court in the case of Bibi Salma Khatoon vs. State of Bihar, AIR 2001 SC 3596, wherein it was held that when the period prescribed is a calendar month running from any arbitrary date, the period of one month would expire upon the day in the succeeding month corresponding to the date upon which the period starts. Therefore, it held that a month means and has to be reckoned according to the British calendar and not by the number of days comprising a month.

Referring to the decision of Bhikha Lal vs. Munna Lal, AIR 1974 Allahabad 366 (Full Bench), the Court held that there was no infirmity on the part of the petitioner in dispatching the appeal by post, Speed Post in the present case, as the order challenged in the appeal was also sent to the petitioner by Speed Post. It was also clarified that there is no bar u/s 85(3A) of the Finance Act, 1994 or the rules framed thereunder, i.e., the Service Tax Rules, 1994 for dispatching or presentation of appeal by Speed Post or by post. Referring to section 9(1) of the General Clauses Act, the Court held that the said section statutorily recognises that while computing the time period the first date is to be excluded when the word ‘from’ is used and to include the last date when the word ‘to’ is used. It also referred to the principle laid down in the decision in Jhabboo Lal Kesara Rolling Mills vs. Union of India, 1985 (19) ELT 367 (All) that if the appeal was sent by registered post to the appellate authority at the correct address within the period of limitation but was received beyond the period of limitation, that would not render it barred by limitation. This principle will apply where it is found that the appeal had been dispatched to the appellate authority prior to the expiry of the period of limitation.

Next, referring to the provisions of section 10 of the General Clauses Act, the Court held that as propounded by the Supreme Court in Harinder Singh vs. S. Karnail Singh, AIR 1957 SC 271, the object of this section is to enable a person to do what he could have done on a holiday on the next working day. Where, therefore, a period is prescribed for the performance of an act in a Court or office and that period expires on a holiday, then according to this section the act should be considered to have been done within that period if it is done on the next day on which the Court or office is open. For section 10 to apply the requirement is that there should be a period prescribed and that period should expire on a holiday. Section 10 itself indicates that this provision is for the computation of time. Therefore, if the limitation for filing an appeal or the extended period for filing an appeal expires on Sunday but it is filed on Monday, then by operation of section 10 it would be deemed to have been done within time.

After discussing the various legal principles as above, the High Court held that as the petitioner received the order on 30th August, 2019, this date would have to be excluded while counting (and) the limitation period of two months would commence from 31st August, 2019. Accordingly, it held that the delay could have been condoned till 31st November, 2019 but because there are no 31 days in November, the extended period of limitation would spill over to 1st December, 2019. This is more so because the word ‘to’ is not used in section 85(3A) to cap the limitation period on 30th November, 2019. Therefore, the appeal was required to have been dispatched by 1st December, 2019. But it was dispatched on 2nd December, 2019. The Court, however, noted that 1st December, 2019 was a Sunday and therefore the benefit of this public holiday would be available to the petitioner in terms of section 10 of the General Clauses Act. Accordingly, the appeal presented on 2nd December, 2019 would be construed to be within the extended period of limitation. The writ petition was therefore allowed.

II. TRIBUNAL
    
3. [2021-TIOL-152-CESTAT-Mum] State Street Syntel Service Pvt. Ltd. vs. CGST Date of order: 25th November, 2020

Notice pay recovered on termination of employment before serving the notice period is a service liable to service tax

FACTS
The appellant was issued with a show cause notice alleging non-payment of service tax during the period 2012-13 to 2015-16 on account of recovery of certain amounts from the employees who had opted for termination of employment or resignation from service before serving the notice period prescribed under the contract of employment, in violation of section 66E(e) of the Finance Act, 1994. The demand was confirmed, hence the present appeal is filed.
    
HELD

The Tribunal noted that the issue of levy of service tax on the amount received by the employer from the employee in lieu of ‘notice period’ on termination of employment is no more res integra and covered by the judgment of the Madras High Court in GET&D India Ltd.’s case -2020-TIOL-183-HC-Mad-ST. The said judgment clearly provides that notice pay in lieu of sudden termination does not give rise to rendition of service either by the employer or the employee. Thus, the appeal is allowed.

4. [2021-TIOL-147-CESTAT-Ahmd] Gujarat Eco Textile Park Limited vs. Commissioner of Central Excise and Service Tax Date of order: 5th March, 2021

Contribution made by own members is not liable to service tax on the ground of mutuality

FACTS
The appellant is a Special Purpose Vehicle (SPV), a public-private partnership. The SPV was formed for acquiring land and setting up infrastructure for establishing textile parks wherein different member textile units could operate. In terms of the scheme the member unit intending to establish a unit in the said park executes a share subscription agreement with SPV and becomes a member of the SPV. On becoming a member, it is entitled to allotment of a parcel of land and access to the common facilities at the park. Subsequent to the execution of the share subscription agreement, the member units and the SPV entered into a lease deed for allotment of land situated in the park. Accordingly, the SPV received payment against the shares purchased, rent for the allotted parcel of land, non-refundable contribution towards capital expenditure and usage charges for the common facilities from the member units. The Revenue sought to demand service tax on non-refundable contribution made by member units under the category of ‘renting of immovable property service.’

HELD
The Tribunal noted that the case of the Department is that the rental amount is collected in the guise of a non-refundable contribution which is nothing but service charge against ‘renting of immovable property service’ and hence liable to service tax. However, the Department has failed to provide any evidence to bolster the allegation. Hence, the contention of the Department has no legs to stand on. In the judgment in Calcutta Club Limited 2019-TIOL-449-SC-ST-LB the Supreme Court has held that the service provided by a company incorporated under the Companies Act to its members is not under the tax net. There is no dispute that the appellant is an incorporated company under the Companies Act and provided the service to its own members; therefore, the ratio of judgment in Calcutta Club applies directly. The demand is therefore unsustainable, hence the same is set aside.

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