2015 (9) TMI 1605 - AT - Service Tax

Levy of service tax - renting of immovable property service - Held that - The conduct of the assessee does not appear to be contumacious but the fact remains is that there was collection of the tax by the appellant during introduction stage of levy which was crystallized by judicial pronouncement in the case of Home Solutions Retail Ltd. Vs Union of India 2010 (5) TMI 3 - DELHI HIGH COURT holding the levy constitutional. Therefore, he has to discharge levy of service tax liability without raising any doubt on that. Penalty - Held that - Penalty for intention to cause evasion does not arise in the circumstances of the case. When retrospective levy imposed an obligation which otherwise was in question, prior to the amendment of law and assessee discharged tax liability as well as liability for the default period, it would be contrary to the legal jurisdiction to penalize the person in a quasi-criminal proceeding of levy of penalty - waiver of penalty justified. Appeal allowed in part.

Summary

Issues:
1. Levy on renting of immovable property under confusion leading to retrospective amendment.
2. Penalty imposition for belated payment without deliberate evasion.
3. Applicability of Section 80 of the Finance Act, 1994.
4. Interpretation of retrospective levy under Finance Act, 2010.
5. Discharge of service tax liability during the introduction stage of levy.
6. Justification for waiving penalty based on reasonable cause.

Analysis:

1. The appellant contended that the confusion regarding the levy on renting of immovable property was clarified through a retrospective amendment to the Finance Act, 2010. The appellant had collected taxes as a precautionary measure to protect its interest, not with the intention of causing evasion to Revenue. The appellant argued that the retrospective levy intended to grant immunity from prosecution, hence immunity from penalty should also be granted. The appellant cited the decision in the case of J. K. Spinning and Weaving Mills Ltd. Vs Union of India and Ors., to support its position.

2. The Revenue's submission was that once there was a default, penalty should be imposed under Section 78 of the Finance Act, 1994. However, the appellant argued that there was no intention to cause evasion and that the retrospective levy imposed an obligation that was previously in question.

3. The Tribunal observed that the conduct of the assessee did not seem contumacious. The judicial pronouncement in the case of Home Solutions Retail Ltd. Vs Union of India confirmed the levy as constitutional. The Tribunal noted that the appellant had discharged the tax liability during the introduction stage of the levy without raising doubts. Therefore, the Tribunal concluded that penalty for intention to cause evasion did not apply in this case.

4. The Tribunal emphasized that penalizing the appellant in a quasi-criminal proceeding for penalty would be contrary to legal jurisdiction and the mandate of the statute. Citing the judgment in the case of J.K. Spinning and Weaving Mills Ltd. and Another Vs Union of India and Ors., the Tribunal found that a reasonable cause for waiving the penalty existed in this case. Consequently, the appeal was allowed, and the penalty was waived based on the reasonable cause presented by the appellant.