2014 (2) TMI 250 - HC - Service Tax

Waiver of pre deposit - Classification - renting of immovable property or business support services - tribunal granted stay ff 50% of service tax demand - Held that - there was a bonafide belief on the part of the appellant that services being rendered by them was not taxable prior to 1 June 2007. The respondent revenue has accepted the service tax under the head renting of immovable property till date without any objection. It was only after two years after the appellant had commenced paying service tax under the category of renting immovable property that a show cause notice demanding service tax from 1 June 2006 to 31 May 2007 has been issued on 22 October 2009. This non payment of service tax by the appellant for the period 1 May 2006 to 31 May 2007 in the present facts could prima facie be considered to be on a bonafide understanding that it is not liable to service tax - Pre deposit reduced to 25% of service tax demand - Decided partly in favour of assessee.

Summary

Issues:
Challenge to Tribunal's order on pre-deposit of service tax and penalty under Central Excise Act, 1944 and Finance Act, 1983.

Analysis:
The appellant challenged the Tribunal's order dated 21 March 2013, which directed a pre-deposit of 50% of the service tax demand of Rs.3,44,45,034 for entertaining the appeal from the Commissioner of Service Tax's order. The appellant contended that the activity in question was not chargeable to service tax during the period from 1 May 2006 to 31 May 2007. However, after a new taxable service was introduced on 1 June 2007, the appellant started paying service tax under the category of "renting of immovable property." The Tribunal held that the appellant's services to concessionaires could be categorized as business support services, rejecting the appellant's argument that it was a purchase and sale transaction. The Tribunal did not address the time bar issue at that stage, deferring it to the final hearing.

The appellant argued for a complete waiver of pre-deposit, citing a similar case where the waiver was granted due to the introduction of a new taxable entry. The appellant claimed a bona fide belief that the services were not taxable before 1 June 2007, as evidenced by the commencement of service tax payment upon the new entry. The revenue accepted the service tax under the head "renting of immovable property" without objection until issuing a show cause notice in 2009. The Tribunal did not consider the appellant's contention on the time bar issue, leading to a debatable invocation of the extended limitation period. The High Court acknowledged the appellant's bonafide belief and modified the pre-deposit requirement to 25% of the service tax demand within six weeks, allowing the appeal to proceed for final hearing upon compliance.

In conclusion, the High Court upheld the Tribunal's prima facie view that the services provided by the appellant could be classified under business support services. However, it recognized the appellant's bonafide belief regarding the tax liability before 1 June 2007 and modified the pre-deposit requirement accordingly. The Court emphasized the revenue's acceptance of service tax under a specific category and directed the appellant to make the revised pre-deposit to proceed with the appeal before the Tribunal for final hearing.