2015 (1) TMI 289 - AT - Service Tax

Renting of immovable property - selling of space/advertisement by the appellant-Municipality - Penalty u/s 76, 77 & 78 - Held that - demand of service tax is for the period from May 2006 to March 2011 on the services of renting of immovable property and selling of space/advertisement by the appellant-Municipality. The learned counsel does not dispute the liability but submits that the appellant being a Municipality was under a bona fide belief that they were not liable to pay and subsequently when the issue was taken up by the department, they were waiting for exemption to be granted by Central Government. He submits that the appellant is not disputing service tax liability which has already been recovered with interest. The only request is that the penalties imposed under Section 76, 77 and 78 of Finance Act, 1994 should be set aside. Having regard to the fact that Government of Andhra Pradesh was trying to get exemption and appellant is a Municipality, we consider that payment of service tax with interest would meet the ends of justice and there is no need for imposition of penalties. Further, we also consider that the appellant has known reasonable cause for non-payment of service tax and therefore, this is a fit case of provision of Section 80 of the Finance Act, 1994. - demand for service tax and interest is upheld - However, penalty is set aside - Decided partly in favour of assessee.

Summary

Issues: Condonation of delay in filing the appeal, imposition of costs for delay, waiver of pre-deposit requirement, liability for service tax on renting of immovable property and penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Condonation of Delay:
The appellant sought condonation of a 340-day delay in filing the appeal, attributing it to waiting for exemption from service tax on renting of immovable properties, which was not granted as expected. The Tribunal, considering the circumstances, granted the condonation of delay. However, a cost of Rs. 10,000 was imposed on the appellant for the delay, to be deposited within eight weeks.

Waiver of Pre-deposit Requirement:
The Tribunal noted that the entire tax amount with interest had been recovered by the department, leaving only penalties as the issue at hand. It was decided that the appeal should proceed to a final decision directly, waiving the pre-deposit of balance dues and addressing the penalties without further delay.

Liability for Service Tax and Penalties:
The demand for service tax from May 2006 to March 2011 on services provided by the appellant-Municipality was acknowledged, with the appellant not disputing the liability. The appellant, being a Municipality, believed they were exempt from payment and awaited a decision from the Central Government. The Tribunal upheld the service tax demand and interest but set aside the penalties under Sections 76, 77, and 78 of the Finance Act, 1994. It was deemed a fit case for the provision of Section 80 of the Finance Act, 1994, considering the circumstances and the reasonable cause for non-payment.

Conclusion:
The Tribunal upheld the demand for service tax and interest while setting aside the penalties imposed. The appellant was directed to deposit Rs. 10,000 for condoning the delay within eight weeks and report compliance. The application for condonation of delay, stay application, and the appeal were disposed of accordingly, with the order taking effect upon the appellant's deposit and notification to the jurisdictional Additional Commissioner/Deputy Commissioner.