Case Note & Summary
The petitioner, Coventry Estates Pvt. Ltd. (formerly S and H Services Pvt. Ltd.), was engaged in construction of a residential complex in a Special Economic Zone (SEZ) under a contract with Sunny Vista Pvt. Ltd. On 31 March 2009, Sunny Vista deposited Rs. 20 crores as a refundable deposit, which the petitioner declared as exempt in its Service Tax Return for October 2008 to March 2009. On 28 September 2010, summons were issued, and documents were submitted. On 12 November 2010, a statement of Mr. Kamlesh Desai was recorded. After a gap of over 10 years, on 16 March 2012, a show cause notice was issued under Section 73 of the Finance Act, 1994 proposing to demand service tax on the deposit. The petitioner challenged the notice by way of a writ petition under Articles 226 and 227 of the Constitution. The court held that the show cause notice was issued after an inordinate delay of 10 years from the relevant period, and the department failed to establish suppression of facts to invoke the extended period of limitation. Further, the deposit was refundable and not consideration for taxable service. The court quashed the show cause notice and all proceedings arising therefrom.
Headnote
A) Service Tax - Show Cause Notice - Delay - The show cause notice issued after 10 years from the relevant period is barred by limitation under Section 73 of the Finance Act, 1994, as the extended period of limitation cannot be invoked without establishing suppression of facts. (Paras 1-20) B) Service Tax - Refundable Deposit - Taxability - A refundable deposit received from a developer for construction in a Special Economic Zone is not consideration for taxable service and cannot be subjected to service tax. (Paras 3-10) C) Constitutional Law - Writ Jurisdiction - High Court under Article 226 can quash a show cause notice if it is without jurisdiction or suffers from inordinate delay, as it would be an abuse of process. (Paras 1-20)
Issue of Consideration
Whether the show cause notice dated 16 March 2012 issued under Section 73 of the Finance Act, 1994 for the period October 2008 to March 2009 is liable to be quashed on the ground of inordinate delay and lack of jurisdiction, and whether the amount of Rs. 20 crores received as refundable deposit is exigible to service tax.
Final Decision
The court allowed the petition and quashed the show cause notice dated 16 March 2012 and all proceedings arising therefrom.
Law Points
- Inordinate delay in issuing show cause notice
- lack of jurisdiction
- refundable deposit not taxable
- principles of natural justice
- Section 73 of Finance Act
- 1994
