Two Major Reliefs for Service Tax Assessees Including Developers

 

We are pleased to share two recent and significant reliefs to service tax assessees across the country. These are as under:-

a)      The Limits of Prosecution and Arrests under Service Tax & Central have been revised

from earlier 50 Lacs to 1 Crore. Further, the CBEC Clarifies that discreetly when and how prosecution to be operated.

 

CBEC Vide Circular No. 1010/17/2015-CX  dated 23rd October, 2015 have revised the  monetary  limits  for  arrest  and  prosecution  substantially upwards to ensure that these powers are not used against small and medium businesses. 

 

The limits have been revised from 50 Lacs to 1 Crore.

 

“Consequently, it has been decided to revise the limits for arrests in Central Excise and Service tax. Henceforth, arrest of a person in relation to offences specified under clause (a) to (d) of sub-section (1) of Section 9 of the Central Excise Act, 1944 or under clause (i) or (ii) of sub-section (1) of section 89 of the Finance Act, 1994, may be made in cases where the evasion of Central Excise duty or Service Tax or the misuse of Cenvat Credit is equal to or more than rupees one crore. Central Excise circular no. 974/08/2013-CX and Service Tax circular no. 171/6 /2013-ST both dated 17-09-2013 stand amended accordingly. “  

 

Further, CBEC has laid down revised  procedure  to  be  followed  for  arrest  and  sanction  of  prosecution  specified with adequate  safeguards  in  these  instructions  to ensure that only in cases of serious nature above the revised thresholds, where there is strong prima-facie evidence, these powers are exercised.

 

b)     Sale of Flats after issuance of occupancy certificate but before issuance of completion certificate shall not be taxable under Service tax as per sources and details hereunder.

In order to resolve a long standing issue relating to levy of Service Tax on sale of flats/dwellings etc. after issue of occupancy certificate but before issue of completion certificate in areas under the jurisdiction of Municipal Corporation of Greater Mumbai i.e. Brihanmumbai Municipal Corporation (BMC), it has been conveyed to the Service Tax Authorities in Mumbai on Friday, 23rd October, 2015 that sale of flats/dwellings etc., where the entire consideration is received after issue of occupancy certificate by BMC, leading to a mere transfer of title in immovable property, falls outside the definition of “Service” provided in Section 65B (44) of the Finance Act, 1994, and is therefore, not taxable. (As per Press Note MoF - PIB - DSM/MA/AK - Release ID :129959 dated 26th October, 2015)

It is imperative to note that the above has been conveyed to Mumbai Service tax authorities only currently.

 

Now this is a very important clarification from the Board and it comes out in the form of a Press Note! And will the Board clarify whether this clarification applies only to Mumbai and not other cities. Should the builders in other cities approach the Board for similar clarifications?

 

It is noteworthy that It was held by Hon’ble Delhi HC in case of Dy CIT, New Delhi vs. Ansal properties and Industries ltd. ITD 116, 253, (2008) 22 SOT 45 (Delhi), where the occupation certificate issued by DTCP in Haryana was considered for the purpose of granting relief on account of deduction U/S 80 IB (10) of income tax act, 1961 while As per explanation (ii) r.w Section 80-IB (10)(a) the completion certificate should be issued by the local authorities on or before 31/03/2008.