The Karnataka High Court has held that the absence of strict adherence to the ratio at the time of payment never leads to paying double tax.
The respondent- M/s. Zyeta Interiors Pvt. Ltd., is a company engaged in the business of carrying out the design, supply and installation of interior works mainly for commercial establishments. The Settlement Commission passed the final order confirming the service tax amount of Rs.40,75,512/- along with interest and penalty of Rs.5,00,000/- and Rs.25,000/- respectively on the Director of the respondent company. The respondent being aggrieved by the order by the Settlement Commission approached the Writ Court which allowed the Writ Petition in part quashing the impugned part of the orders.
The Revenue contended that the assessee was required to strictly adhere to the provisions of Section 68[2] of the Finance Act, 1994 and required to pay 75% of the tax. Further contended that the remanding of matter to the settlement commission for re consideration afresh was not tenable. The respondent-assesseeplaced reliance on the CBEC Circular No.341/18/2004-TRU and contended that the reverse charge mechanism should not lead to double taxation. The assessee paid the full tax amount under the service provider in the ratio of 50:50, the same cannot be construed as a shortage of payment of tax.
Justice S Sujatha & Justice Shivashankar Amarannavar observed that the tax in its entirety has reached the hands of the ex-chequer and merely for the reason that there was no strict adherence to the ratio as envisaged during the relevant point of time for payment of tax cannot be made liable to pay the double tax. It was noted that the Single Judge has remanded the matter for fresh consideration mainly on the ground that the assessee was ready and willing to produce the original invoices and the court disposed of the writ appeal by the revenue.
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