2007 (11) TMI 81 - AT - Service Tax

Appellant is basically running educational institution - activity of letting out the open plot is not their major activity - normally, the term mandap keeper does not include the open lot - no intention to evade service tax - Section 80 is rightly applicable so penalties imposed are set aside

Summary

Issues:
1. Applicability of service tax on letting out open land for temporary use.
2. Imposition of penalties under Sections 76, 78, and for non-filing of returns.
3. Consideration of genuine ignorance and intention to evade taxes.
4. Interpretation of the term 'mandap keeper' in the context of service tax.

Analysis:
1. The appeal addressed the issue of whether letting out an open land for temporary use by a charitable institution for certain functions would attract service tax under the category of a mandap keeper. The appellant, an educational institution, had let out an open plot and paid the tax upon investigation. The original authority imposed service tax, which was disputed by the appellant. The Tribunal considered the nature of the institution's activities and the interpretation of the term 'mandap keeper' in the context of service tax. It was noted that the main activity of the institution was education, and letting out the open plot was not a significant part of their operations. The Tribunal accepted the appellant's submission that they had no intention to evade taxes and found that the provision of Section 80 of the Finance Act, 1994 was applicable in this case. The appeal was allowed, and the tax demand was not in dispute.

2. The issue of penalties under Sections 76 and 78, along with penalties for non-filing of returns, was also considered in the appeal. The Commissioner (Appeals) had reduced the penalties imposed on the appellant. The appellant's advocate argued that the penalties were not justified, emphasizing the institution's reputation and genuine ignorance regarding the service tax implications of letting out the open plot. The Tribunal, after careful consideration of both sides' submissions, set aside the penalties imposed, taking into account the appellant's lack of intention to evade taxes and the specific circumstances of the case.

3. The Tribunal's analysis highlighted the importance of considering the appellant's genuine ignorance and lack of intention to evade taxes when determining the applicability of penalties in tax matters. The appellant's submission that they were not disputing the service tax amount paid, coupled with their argument that they were unaware of the service tax implications of letting out the open plot, played a crucial role in the Tribunal's decision to allow the appeal and set aside the penalties. The Tribunal acknowledged the leniency shown by the Commissioner (Appeals) but ultimately found in favor of the appellant based on the specific circumstances and the interpretation of relevant legal provisions.

4. Lastly, the judgment delved into the interpretation of the term 'mandap keeper' in the context of service tax. The Tribunal noted that while the definition of service could be interpreted to include letting out an open plot, the appellant's primary activities as an educational institution did not align with the typical understanding of a mandap keeper. The Tribunal referenced a judgment by the Hon'ble High Court of Madras to support the interpretation that the appellant's letting out of the open plot did not fall squarely within the category of a mandap keeper for service tax purposes. This interpretation further bolstered the Tribunal's decision to allow the appeal and set aside the penalties imposed on the appellant.