2019 (2) TMI 1857 - AT - Service Tax

Invocation of Extended period of limitation - Government Entity - non-payment of service tax - renting of immovable property services - demand along with interest and penalty - HELD THAT - The appellant is admittedly an educational institution which is wholly owned by Government of India. As such in terms of the Hon ble Rajasthan High Court s decision COMMISSIONER CENTRAL EXCISE JAIPUR-I VERSUS RAJASTHAN RENEWABLE ENERGY CORPORATION LTD 2018 (8) TMI 1690 - RAJASTHAN HIGH COURT no mala-fide can be attributed to them so as to justifiably invoke the longer period of limitation - As such the demand beyond the normal period is hit by the provisions of Section 73 of the Finance Act 1994 and is unsustainable. Similarly in terms of the said order of the Hon ble Rajasthan High Court the penalty imposed upon the appellant is also liable to be set aside. Thus the demand falling within the normal period is upheld alongwith interest and the demand falling beyond the normal period is set aside along with setting aside of interest and entire penalty - appeal allowed in part.

Summary

Issues:
Service Tax liability on services provided by a Central Government Educational Institution under different categories, invocation of longer period of limitation, applicability of penalty, interpretation of the provisions of Section 73 of the Finance Act, 1994.

Analysis:
The case involved a Central Government Educational Institution registered under the Service Tax Department for providing services falling under various categories, including "Service of Renting of Immovable Property." The Revenue issued a Show Cause Notice demanding payment of Service Tax for the period 2007-08 to 2011-12, which was confirmed by the Commissioner of Service Tax, along with interest and penalty, rejecting the appellant's plea of time bar.

The appellant, represented by a learned Advocate, argued that being a Central Government entity, no mala-fide intent could be attributed to them to justify invoking the longer period of limitation. The Advocate contended that during the relevant period, the taxability of Renting of Immovable Property was under litigation in various High Courts, creating uncertainty. The appellant believed in good faith that being an educational institution, they were exempt from tax liability. The Advocate cited a judgment of the Hon'ble High Court of Rajasthan to support the argument that no mala-fide could be assumed in cases involving State Government Undertakings.

On the other hand, the Revenue, represented by the Assistant Commissioner, supported the findings of the Lower Authorities and requested the appeal to be rejected. After considering both sides' submissions, the Tribunal noted that the appellant, being a Government-owned educational institution, could not be imputed with mala-fide intent to warrant invoking the longer period of limitation. Referring to the Rajasthan High Court's decision, the Tribunal held that the demand beyond the normal period was unsustainable under Section 73 of the Finance Act, 1994. Consequently, the penalty imposed on the appellant was set aside based on the same reasoning.

In conclusion, the Tribunal upheld the demand within the normal period, along with interest, while setting aside the demand beyond the normal period, interest, and the entire penalty. The appeal was disposed of accordingly.