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2018 (1) TMI 1464 - Commission - Service TaxNon-payment of service tax - Renting of Immovable Property Services - applicant had taken registration with Service Tax department but did not discharge service tax on taxable income received - period from April, 2010 to March, 2015 - demand of service tax under proviso to Sections 73(1) of the Finance Act, 1994 and interest thereon under Section 75 of the Finance Act, 1994 and penalty u/s 76, 77 and 78 of the Finance Act, 1994 apart from demanding late fee for belated filing of returns under Section 70 of the Finance Act, 1994 - An amount of ₹ 51,69,268/- paid by the applicant during the course of investigation was sought to be appropriated towards the service tax demand. Collection of market fee/slaughter house charges - Held that - The right to collect market fee/slaughter house fee were granted to individuals (lessees) for a financial year based on bids offered during auction conducted by the Municipal Council, Mahaboobnagar for a specified amount. The lessee shall deposit part of the specified amount as three months advance towards the market fee/slaughter house fee. The lessee shall remit the balance specified amount in nine monthly equal instalments starting April of the financial year. The three months advance amount paid by the lessee will be adjusted in the last three months of the financial year (January-March). The lessees shall collect the market fee/slaughter house fee as per Scheduled Rates already fixed and notified by the Municipality - collection of market fee/slaughter house charges were not towards renting of immovable property - Bench holds that no service tax is payable on slaughter house fee collected by the applicant during the impugned period. It is also seen that with respect to market fee , Board vide Circular No. 157/8/2012-S.T., dated 27-4-2012 had clarified that the services provided by Agricultural Produce Marketing Committee are classifiable under Business Auxiliary services . Para 5 of the said circular reads as As statutory bodies, APMCs provide basic facilities in the market area out of the market fee collected from the licencees, mainly to facilitate the farmers, purchasers and others. APMCs provide a host of services to the licencees in relation to procurement of agricultural produce, which are inputs in terms of the definition given in Section 65(19) of the Finance Act, 1994 itself. To that extent the meaning of input is much wider in scope than the meaning assigned in Rule 2(k) of Cenvat Credit Rules, 2004. Therefore, it is clarified that the services provided by the APMC are classifiable as BAS and hence covered by the exemption under Notification 14/2004-S.T. Demand of service tax under the category of Renting of Immovable Property Service - Held that - It is observed that prior to 1-7-2012, the services provided by the applicant would not be covered under Renting of immovable property service but more appropriately covered under Business Auxiliary Service and exempted in terms of Notification No. 14/2004 S.T., dated 10-9-2004. With effect from 1-7-2012, with the introduction of Negative List, the services provided by a local authority such as Panchayat, Municipality, Municipal Committee, etc., as well as services relating to agriculture and agricultural produce are covered under the Negative List. Further activity in relation to any function entrusted to a municipality under Article 243W of the Constitution are specifically exempt under mega exemption notification No. 25/2012-S.T., dated 20-6-2012. In any case, the charges collected by the applicant cannot be considered as consideration for services relating to renting of immovable property. Hence the Bench holds that the demand of Service Tax on market fee under Renting of Immovable property service in not sustainable. Penalty - Held that - Bench is in agreement with the department s view that but for the investigation done by the Anti-Evasion Wing of the Jurisdictional Commissionerate, the non-payment of service tax by the applicant would not have come to light and there would have been loss of revenue to the Government exchequer. However considering the fact that the applicant is a Municipality, a local authority, there could be no reasonable belief to charge mala fides - the Bench considers it a fit case to accord full immunity from penalty to the applicant. Prosecution - Held that - The Bench considers it as a fit case for grant of immunity from prosecution to the applicant. Application disposed off.
Issues Involved:
1. Service Tax Liability on Renting of Immovable Property Services. 2. Applicability of Service Tax on Market Fees and Slaughter House Fees. 3. Imposition of Penalties and Immunity from Prosecution. Issue-wise Detailed Analysis: 1. Service Tax Liability on Renting of Immovable Property Services: The applicant, a municipality, collected amounts towards lease/rental charges for shops, complexes, Town Hall, Auditorium, Community Hall, and Market fees for maintenance/repair of the slaughterhouse, which fall under "Renting of Immovable Property Services." The applicant admitted a service tax liability of ?45,23,383/- and interest thereon of ?18,46,984/- out of the total demand of ?51,72,663/-. The applicant had already paid ?51,69,268/- towards the liability. The Show Cause Notice (SCN) demanded service tax under Sections 73(1) and 75 of the Finance Act, 1994, and proposed penalties under Sections 76, 77, and 78. 2. Applicability of Service Tax on Market Fees and Slaughter House Fees: The applicant disputed the service tax demand on market fees (?6,18,337/-) and slaughterhouse charges (?30,943/-) totaling ?6,49,280/-. The applicant argued that market fees collected for providing basic facilities to sellers and purchasers were not rent and were classifiable as 'Business Auxiliary Service,' exempt under Notification No. 14/2004-S.T. Similarly, fees collected for slaughtering animals were not for renting immovable property but for allowing contractors to collect fees in open areas, exempt from service tax under Notification No. 25/2012-S.T. The Bench agreed, citing the CESTAT decision in Agricultural Produce Market Committee v. CCE, Nagpur, and held that the demand for service tax on market fees and slaughterhouse charges was not sustainable. 3. Imposition of Penalties and Immunity from Prosecution: The applicant contended that simultaneous penalties under Sections 76 and 78 were impermissible and cited case laws supporting their claim. The applicant argued that there was no mala fide intention to evade tax, and the service tax was not paid under a bona fide belief. The Bench noted that the applicant had cooperated with the department, made full disclosure, and paid the service tax and interest before the SCN was issued. Considering the applicant's status as a municipality, the Bench granted full immunity from penalties and prosecution. Findings and Decision: The Bench settled the service tax liability at ?45,23,383/- with applicable interest. The applicant was eligible for a refund of ?6,49,280/- for the disputed market fees and slaughterhouse charges. The Bench granted full immunity from penalties and prosecution, emphasizing the applicant's cooperation and full disclosure. Order: 1. The additional service tax settled at ?45,23,383/- is appropriated from the already paid amount, and the balance ?6,49,280/- is refundable. 2. Interest liability to be worked out and adjusted from the excess paid service tax amount. 3. Full immunity from penalties under the invoked provisions. 4. Immunity from prosecution under the Finance Act, 1994. The immunities are subject to withdrawal if any material particulars are found to be withheld or false evidence is given. A copy of the order is to be given to the applicant and the jurisdictional Commissioner for implementation.
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