2018 (8) TMI 1978 - AT - Service Tax

Non-payment of service tax - renting of immovable property service - time limitation - HELD THAT - Even though the show cause notice merely states that the service tax has not been paid by reason of wilful mis-statement and suppression of facts with an intent to evade payment of service tax, mere allegations in the show cause notice is not sufficient to allege suppression and mis-statement on the part of the appellant in absence of highlighting the reason of formation of such belief. Mere contravention of provisions of law is not sufficient to invoke extended period of limitation. Contravention necessarily has to be with intent to evade payment of service tax. Extended Time of Limitation - HELD THAT - It is undisputed fact that doubts and disputes prevails over the issue and the court also held the levy of service tax on renting of immovable property as per un-amended definition is not service. However, after amendment made by the Finance Act, 2010, the amended definition is held as service in the Second Home Solutions Retailers case. As a result, larger period of limitation is not invokable. Renting on immovable property has been a subject matter of litigation in various judicial forums. The demand cannot invoke extended period as the issue was not free from doubt. In the present case, the whole demand is for extended period only. The present demand against the appellant is not tenable both on merit as well as on time bar - Appeal allowed - decided in favor of appellant.

Issues:
1. Non-payment of Service Tax on renting of immovable property service.
2. Constitutional validity of Service Tax on renting of immovable property.
3. Barred by limitation - Intent to evade payment of service tax.
4. Interpretation of lease agreement regarding the use of premises.
5. Applicability of extended period of limitation.
6. Impact of judicial decisions on the demand for service tax.

Issue 1: Non-payment of Service Tax on renting of immovable property service

The case involved a company engaged in providing services related to "Erection, Installation & Commissioning of equipments and machineries" and receiving rent for business and residential purposes. A Show Cause Notice was issued for non-payment of Service Tax on renting of immovable property service. The Adjudicating Authority confirmed the demand with penalties, leading to an appeal before the Tribunal.

Issue 2: Constitutional validity of Service Tax on renting of immovable property

The appellant argued that the constitutional validity of levying Service Tax on renting of immovable property was challenged in the Delhi High Court. The High Court held that renting for business or commerce did not involve value addition, thus not constituting a taxable service. The matter was pending in the Supreme Court, creating a belief that the Service Tax on renting did not apply during the period in question.

Issue 3: Barred by limitation - Intent to evade payment of service tax

The appellant contended that the demand was time-barred due to the belief that Service Tax on renting of immovable property was not applicable, supported by judicial decisions and statutory amendments. The Tribunal found that mere contravention of the law was not enough to invoke the extended period of limitation, as intent to evade payment must be proven.

Issue 4: Interpretation of lease agreement regarding the use of premises

The Tribunal analyzed the lease agreement terms, emphasizing that the premises were let out for residential use, and any personal office use did not change the primary residential purpose. The liability for any misuse of the premises was on the lessee, and the appellant's case on limitation was strengthened by substantial litigation on the tax liability.

Issue 5: Applicability of extended period of limitation

The Tribunal noted that doubts and disputes existed regarding the levy of Service Tax on renting of immovable property, leading to statutory amendments and retrospective changes. Considering the legal uncertainties and amendments, the demand for the extended period was deemed untenable.

Issue 6: Impact of judicial decisions on the demand for service tax

The Tribunal discussed various judicial decisions cited by the appellant, highlighting the requirement of deliberate suppression of facts to invoke the extended period of limitation. The case law emphasized that mere non-declaration or omission was not sufficient to warrant the extended period.

In conclusion, the Tribunal allowed the appeal, ruling that the demand for Service Tax was not sustainable based on both merit and time limitations, considering the legal uncertainties and the appellant's belief regarding the applicability of Service Tax on renting of immovable property during the relevant period.

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