2014 (1) TMI 515 - AT - Service Tax

Penalty u/s 76 & 77 - Renting of immovable property - Commissioner while imposing penalty had merely observed that the notice failed to discharge Service Tax as applicable and get themselves registered with the proper authority as they did not disclose the matter to the department before the case was booked is sufficient for imposing various penalties - It is evident from the agreements entered between the Applicants and their tenant that the said agreement was entered on 25.11.2005, while as renting of immovable property became taxable w.e.f. 01.06.2007. As such the question of disclosing the activity of renting by the Appellants does not arise - Commissioner has not imposed any separate penalty under Section 76, 77 and 78 of the Finance Act, 1994. Composite penalty under different provisions of the statute is impermissible as held by this Tribunal in the case of Commissioner of Central Excise, Coimbatore vs. Precot Mills Ltd. 2006 (12) TMI 383 - CESTAT, CHENNAI - there were sufficient cause for not imposing various penalties - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty under Section 78 read with Section 76 and 77 of the Finance Act, 1994 for non-registration and non-payment of Service Tax.
2. Confusion regarding the levy of Service Tax on renting of immovable property.
3. Applicability of penalty in the case of reasonable cause for non-registration and non-payment of Service Tax.
4. Composite penalty under different provisions of the statute.

Issue 1: Imposition of Penalty under Section 78 read with Section 76 and 77 of the Finance Act, 1994
The Appellants were penalized for failure to register with the Central Excise authorities and not discharging Service Tax on renting immovable property. The Assistant Commissioner confirmed the demand, but noted the Appellants registered and paid the tax upon clarification. The Commissioner imposed a penalty equal to the tax amount. The Appellants challenged this penalty before the Tribunal.

Issue 2: Confusion Regarding the Levy of Service Tax on Renting of Immovable Property
The Appellants argued confusion regarding the levy of Service Tax on renting properties due to conflicting judgments. They cited a Delhi High Court case stating that renting immovable property for business does not constitute a taxable service unless value addition is involved. A retrospective amendment made the activity taxable from 01.06.2007. The Supreme Court's interim order and a Board circular indicated confusion among taxpayers, leading to proposed penalty waivers for compliance with the Court's directions.

Issue 3: Applicability of Penalty for Reasonable Cause
The Tribunal found that the Appellants, being doctors by profession, promptly paid the Service Tax upon realizing their liability, indicating no intention to evade tax. The Commissioner's penalty imposition based on failure to disclose the activity before the case was booked was deemed insufficient. The Tribunal highlighted the lack of separate penalties under various provisions of the Finance Act, emphasizing the impermissibility of composite penalties.

Issue 4: Composite Penalty under Different Provisions of the Statute
The Tribunal observed that the adjudicating Commissioner did not impose separate penalties under Section 76, 77, and 78 of the Finance Act, 1994. Citing precedent, the Tribunal held composite penalties under different provisions impermissible. Considering the circumstances, the Tribunal set aside the Commissioner's order, finding reasonable cause for the Appellants' actions and allowing the Appeal.

This judgment addresses the imposition of penalties for non-registration and non-payment of Service Tax on renting immovable property, highlighting confusion surrounding the taxability of such activities and the Appellants' prompt compliance upon realizing their liability. The Tribunal emphasized the need for penalties to be proportionate and based on the specific circumstances of each case, ultimately setting aside the penalty imposed by the Commissioner.