Challenging Imposition of Service Tax - Not a Wise Business Policy?
GETTING a stay against a new imposition does not seem to make good business sense. When the Government introduces a new levy, they study the legal implications and are usually ready to counter any legal attack. In the unlikely event of Government failing in the court, they always have the weapon of retrospective amendment, which they will use liberally. Not a single service, so far had been effectively set aside and the Government's success rate is almost hundred per cent. Ultimately the service provider will have to pay the tax - and with interest and sometimes with penalty too and at that time they will not be able to collect the tax from their customers. Apart from the huge expenses in the High Court and the Supreme Court, the petitioners will end up paying the tax with interest.
Even when the Delhi High Court struck down the levy of Service Tax on renting in the ‘Home Solutions' case, the Board in letter F. No 336/10/2009 – TRU dated 15.07.2009, informed the field formations, “ the Department has filed an appeal against the said order of the Delhi High Court, and the dispute has not reached finality. Given the situation, service tax formations throughout the country, are instructed to take necessary action to safeguard revenue by either pursuing the tax payer to pay up the service tax due or resort to means under law to protect the revenue.”
And the Chennai Service Tax Commissioner in an RAC meeting stated, “Board was aware of the decision of the Hon'ble High Court of Delhi and a SLP along with Stay Petition has been filed before the Hon'ble Supreme Court of India. It would be incorrect to stop payment of service tax, as otherwise demand notice would be issued by the jurisdictional officers invoking interest and penalty provisions. In the event of Revenue winning the appeal, the responsibility for the payment of applicable Service Tax with interest would squarely fall on the landlord. Hence, till the Hon'ble Supreme Court decides the case, it would be proper to mention service tax in the bills and remit the tax collected into the Govt. Account.”
The best method would be to beg, request, persuade or force the Government to put the levy on hold. The All India Motor Transport Congress had been consistently successful against Service Tax on goods transport. (Of course, Government asked somebody else to pay the tax). Recently the Health Industry was successful in mobilising public opinion against the ‘misery tax' as they called it and the Government had to relent and withdraw the proposed tax.
If you are going to the North Block to make a representation, please ensure that you don't carry any chewing gum with you!
A Government that taxes education and legal services cannot be expected to exempt bars and lodges, but somehow the BABAs who provide spiritual services and collect hundreds of Crores to service disturbed souls are not taxed.
You are doomed if you pay; you are doubly doomed if you don't pay.