2015 (7) TMI 1008 - AT - Service Tax

Renting of immovable property service - Invocation of extended period of limitation - Held that - As said finding of the learned Commissioner (Appeals) has attained finality, wherein it has been held that there is no mens rea involved in the present case, therefore, relying on the decision of Bombay High Court in the case of Saswad Mali Sugar Factory Ltd.(2013 (11) TMI 1009 - BOMBAY HIGH COURT ), I hold that the extended period of limitation is not invokable. Therefore, demands confirmed by invoking the extended period are set aside - Decided partly in favour of assessee.

Summary

Issues:
Appeal against demand of Service Tax for renting of immovable property service for the period 2007 to 2012.
1. Applicability of extended period of limitation in issuing show cause notice.
2. Imposition of penalties under sections 76, 77, and 78 of the Act.
3. Liability to pay Service Tax on leasing out shops owned by Nagar Palika Parishad.

Analysis:

Issue 1: Applicability of extended period of limitation in issuing show cause notice
The case involves a show cause notice issued to the appellant for not paying Service Tax on Lease Rent received for renting out shops, invoking the extended period of limitation. The appellant argued that since there was no mens rea involved, the extended period of limitation should not be invoked. The Commissioner (Appeals) dropped the penalties under sections 76 and 77, stating that as a government body, there was no mens rea involved. The final decision held that the extended period of limitation is not invokable in the absence of mens rea, setting aside the demands confirmed under the extended period.

Issue 2: Imposition of penalties under sections 76, 77, and 78 of the Act
The Commissioner (Appeals) dropped the penalties under sections 76 and 78, citing the absence of mens rea as the appellant was a government body. However, a penalty under section 77 was imposed as the appellant had not registered with the department. The decision highlighted that since no mens rea was involved, penalties under sections 76 and 78 were not applicable, but a penalty under section 77 was justified due to non-registration.

Issue 3: Liability to pay Service Tax on leasing out shops owned by Nagar Palika Parishad
The appellant, a Nagar Palika Parishad, leased out shops owned by them, leading to the imposition of Service Tax on the lease rent received. The appellant claimed ignorance about the levy of Service Tax but was deemed liable as the shops were leased out. The argument of bonafide belief was rejected, emphasizing that ignorance could not be used as a defense. The decision emphasized that the appellant's failure to provide information voluntarily led to the department discovering the non-payment during audit and intelligence activities.

In conclusion, the judgment partially allowed the appeal, setting aside demands confirmed under the extended period of limitation due to the absence of mens rea. Penalties under sections 76 and 78 were not imposed, but a penalty under section 77 was upheld for non-registration. The case underscores the importance of compliance with tax obligations, even in cases of ignorance, and the implications of not voluntarily disclosing relevant information to tax authorities.