2016 (3) TMI 782 - AT - Service Tax

Imposition of penalty - Section 76, 77 & 78 of the Finance Act, 1994 - Renting of immovable property - Service tax along with interest deposited before issuance of show cause notice - Held that - as per various decisions of the Tribunal and in terms of the provisions of Section 80(2) of the Finance Act, 1994., the penalty is not imposable. - Decided in favour of appellant

Summary

Issues:
Challenge to penalty imposed under Sections 76, 77 & 78 of the Finance Act, 1994; Applicability of Section 80(2) of the Finance Act; Dispute regarding leviability of service tax on renting of immovable properties; Denial of CENVAT credit without proposal in show-cause notice.

Analysis:

The judgment concerns the challenge to a penalty of Rs. 1.17 crores imposed on the appellant under Sections 76, 77 & 78 of the Finance Act, 1994. The issue revolves around the leviability of service tax on renting of immovable properties during a disputed period. Initially, the Hon'ble High Court of Delhi held that renting of immovable property cannot be considered a service. However, a retrospective amendment by the Finance Act, 2010 made renting of immovable property liable to service tax from 01/06/2007. The appellant's argument is that they deposited the service tax before the show-cause notice was issued, indicating no malafide intent.

The appellant's case also relies on Section 80(2) of the Finance Act, which states that if service tax along with interest is paid within 6 months from a specific date, no penalty shall be imposed. The appellant contends that as they paid the service tax before the retrospective amendment or within the specified period, no penalty should be levied. Various decisions, including those of the Tribunal, support this argument.

The Tribunal cited precedents where it was held that no penalty should be imposed if the service tax with interest is paid within the specified period. The Commissioner's reasoning for not following these decisions due to the revenue involved and the recent nature of the decisions was deemed unjustified. The Tribunal emphasized that the law declared by them is binding and applicable to all assessees, regardless of revenue amounts.

Additionally, the judgment discussed the provisions of Section 80(2) introduced in 2002, emphasizing that no penalty shall be imposed for failure to pay service tax if the amount is paid within the specified period. The Tribunal and High Court have previously noted that when an assessee pays the tax with interest, there is no need for a penalty notice. Therefore, the judgment found no justifiable reasons to impose a penalty and set it aside.

Furthermore, the confirmation of a demand of Rs. 3.75 lakhs by denying CENVAT credit to the assessee was deemed beyond the scope of the notice. As there was no proposal in the show-cause notice regarding the denial of CENVAT credit, the confirmation of the demand was set aside. The appeal was disposed of accordingly.