2016 (12) TMI 226 - AT - Service Tax

Levy of service tax or VAT? - activity of leasing of building and machinery to various clients. On this activity, the appellant is paying/booking VAT on the amount of consideration received by them, as they have given right to use the property/machinery - whether the activity amounts to provision of service or sale? - Held that - I find that in this case, the appellant was paying/booking VAT on the Lease amount. As per the VAT Act, right to use property is liable to VAT also. In that circumstances, it cannot be alleged against the appellant that they have suppressed facts, therefore, the payment of service tax along with interest is sufficient and qualifies as per section 73(3) of the Finance Act, 1994 - I hold that as the appellant was paid service tax along with interest on being intimated to the appellant. No penalty is imposable on the appellant, therefore, the impugned order is qua imposing penalty is set aside - appeal allowed in favor of assessee.

Summary

Issues: Appeal against penalty under Section 77 & 78 of the Finance Act, 1994 for leasing activities.

Analysis:
1. Facts of the Case: The appellant is involved in leasing buildings and machinery, paying VAT on consideration received. Revenue claims activities fall under Renting of Immovable Property Services, initiating proceedings resulting in service tax demand, interest, and penalties.

2. Appellant's Argument: Appellant's representative, a Company Secretary, argues investigation on lessee prompted payment of service tax, indicating no fault on the appellant's part. VAT already paid on lease amount, hence no liability for service tax, making penalties under Section 77 & 78 inapplicable.

3. Revenue's Position: Revenue contends appellant suppressed facts, justifying penalties imposed by the adjudicating authority.

4. Judgment: After hearing both parties, the judge notes the appellant's VAT payment on lease amounts, as per VAT Act's provisions on property use rights. Concludes no fact suppression by the appellant, as service tax with interest was promptly paid upon lessee's advice, meeting requirements of Section 73(3) of the Finance Act, 1994.

5. Decision: The judge rules in favor of the appellant, setting aside the penalty-imposing order. No penalty deemed applicable as service tax with interest was paid promptly upon intimation. The appeal is allowed under these conditions.