2017 (5) TMI 959 - AT - Service Tax

Extended period of limitation - penalties - Held that - the services rendered by the appellant under various categories may liable to be taxed as undisputedly, appellant had received consideration for rendering these services - demand for normal period valid - however, Aurangabad Municipal Corporation being a statutory body, allegation of suppression of facts with intention to evade tax are not sustainable in law - the extended period cannot be invoked against the appellant for demanding service tax liability on the findings that there was suppression of facts with intention to evade service tax liability. Penalty - Held that - the appellant being statutory body, the intention to evade service tax cannot be upheld - invoking the provisions of Section 80 of the FA, 1994, the penalties imposed on the appellant is set aside. The service tax liability needs to be recomputed by the adjudicating authority that falls within the period of limitation and interest liability thereon also needs to be discharged by appellant - appeal allowed - decided in favor of assessee.

Summary

Issues:
Service tax liability on various services rendered by a Municipal Corporation from 2006 to 2011, invocation of extended period for demand of tax, imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The appeal challenged an order-in-original dated 17.10.2012 regarding the non-payment of service tax by a Municipal Corporation for services provided from April 2006 to March 2011. The Corporation offered services such as renting of immovable property, mandap keeper, sale of advertising space, supply of tangible goods, and health club and fitness services. The issue of contention was the non-discharge of service tax liability and the imposition of penalties. The appellant contested the show-cause notice on both substantive and limitation grounds. The adjudicating authority confirmed the demand, interest, and penalties under relevant sections of the Finance Act, 1994.

The appellant argued that being a Municipal Corporation, they had no intent to evade service tax, citing relevant case laws. They also highlighted a previous show-cause notice and turnover of estate officers as reasons for not providing detailed information. The Department reiterated the findings of the lower authorities. The Tribunal observed that the services provided were taxable under the Finance Act, 1994, as the Corporation received consideration for them. The main dispute was the invocation of the extended period for tax demand and penalties.

The Tribunal agreed with the appellant that the extended period could not be invoked against a statutory body like the Municipal Corporation for alleged suppression of facts to evade service tax. Citing a previous judgment, the Tribunal held that there could be no mala fide intention for government bodies to evade tax, considering it as an omission rather than deliberate evasion. Consequently, the extended period was not upheld, and the demand beyond the limitation period was set aside. The penalties imposed were also revoked under Section 80 of the Finance Act, 1994, due to the Corporation's status as a statutory body.

In conclusion, the Tribunal directed the recomputation of service tax liability within the limitation period and the discharge of interest liability by the appellant. The appeal was allowed, and the penalties were set aside. The order was pronounced in court on 07/04/17, disposing of the appeal and the case.