Dear sir
your problem is really very acute. But as we all know payment of service tax is mandatory after the finance act 2010. And after discussing the relevant authorities I have answers to all your questions put in point wise as below.
1. try to convince your client that payment of service tax is mandatory after the 2010 budget retrospectively. And ask him to pay service tax on the gross amount separately...else you will have to pay the service tax out of the gross amount..
2. Interest payable is 13 % from the date the payment became due till the date of actual payment. What you can do here is that you can show that since the matter was disputed we received the entire amount of the last year in the month of march 2010 or so... by doing this you can prevent too much of interest payment as sercice tax is charged on receipt basis. But the Condition remains that Payment of interest is mandatory anyhow.
As far as payment of penalty is concerned you may take exemption/rebate under section 80 by showing reasonable cause. And I am sure the appropriate authority will exemt the payment of penalty in view of enforceable/genuine/valid Hon'ble Delhi High Cout Order.
3. If your client agrees to pay service tax for the last(disputed) year he shall be elligible to take cenvat credit as usual and even for the last year. And i hope your client will pay service tax for the last year as well because by doing so he can claim cenvat credit for last year also. Obviously your new invoice shall from now on (i.e. form 1 april 2010) shall include the service tax amount also to which your client cannot deny.
Last but not the least (although more draconian but true) if your client or the said immovable property does not come within the jurisdiction of Honble Delhi High Court than in that case there is no reason why your client has not payed service tax on rent of the immovable property. The judgement of april 2009 is enforceable only in delhi jurisdiction and not in other states or union territories. And in this case(i.e. the immovable property is in some other state and not in delhi) he may have to pay the penalty amount as well along with the interest and no rebate under section 80 can be claimed.
CAclubindia
