The Gujarat High Court ruled that sometimes delay in Authority of Advance Ruling (AAR) may frustrate investigation and also hinder the interest of the Revenue.
The writ applicant, M/s SDB Diamond Bourse received an advance of Rs.3.40 crore from the interested members during the Financial Year 2014-15 for acquiring office space in the proposed ‘Diamond Bourse’ constructed by the writ applicant. Such amount received by the writ applicants was required to be reported in the ST3 returns filed for the relevant period.
However, as alleged, the receipt of the amount was suppressed in the ST3 returns for the relevant period. On the basis of the information as regards the evasion of tax, the HQ Anti Evasion Branch of Surat Commissionerate initiated investigation. In the course of the investigation by the authorities, a search was conducted under Section 82 of the Finance Act, 1994, on 6th April 2016.
After the search and seizure under Section 82, the writ applicants preferred an application before the AAR under Section 96(C) of the Act on the two issues.
Firstly, whether service tax would be leviable on the transaction of SDB with its members based on the concept of mutuality.
Secondly, whether interest and/or penalty will be leviable, as claimed by the department, when there was no liability to pay service tax, given that the amount collected was in the nature of refundable deposit till the time the land was allotted by the Government of Gujarat to SDB.
Mr.Tushar Hemani, the senior counsel appearing for the writ applicants, has only one argument to canvass, and that is, with respect to the pendency of the proceedings before the AAR.
According to Mr.Hemani, the Commissioner should have waited for the final order to be passed by the authority concerned so that the finding on the two questions referred to above would have been helpful to the Commissioner in taking the final decision as regards the impugned show cause notice.
The division bench of Justice J.B.Pardiwala and Justice Ilesh J.Vora refused to interfere with the impugned order passed by the Commissioner only on the ground that he should have waited for the ruling of the AAR.
“Thus, in the peculiar facts and circumstances of the case, we decline to grant any relief to the writ applicants and relegate them to pursue the appeal preferred by them, before the Tribunal. The Tribunal shall decide the appeal expeditiously in accordance with law without being influenced in any manner with any of the observations made by this Court in this order,” the Court while dismissing the petition said.
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