2017 (6) TMI 325 - AT - Service Tax

Renting of Immovable Property - non-payment of service tax - demand - Held that - the appellants have been paying the service tax on Renting of Immovable Property upto April 2009 and he stopped paying service tax on Renting of Immovable Property from April 2009 onwards on account of the decision of the Delhi High Court in the case of Home Solution Retail India Ltd. 2009 (4) TMI 14 - DELHI HIGH COURT , wherein the Delhi High Court has held that Renting of Immovable Property does not fall in the definition of service - the appellant had a bona fide belief that the Renting of Immovable Property Service is not taxable and therefore he did not pay the service tax and the conduct of the appellant has been stated by Clause 75 of the Finance Bill 2010. Penalty not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Non-payment of service tax for the period from April 2009 to March 2010 on Renting of Immovable Property Service; Rejection of appeal by Commissioner (Appeals); Imposition of penalty under Section 76; Applicability of statutory provisions and judicial precedents; Retrospective amendment in the definition of 'service' in Budget 2010; Bona fide belief of the appellant regarding non-taxability of Renting of Immovable Property Service.

Analysis:
The appeal was filed against the Commissioner (Appeals) order rejecting the appellant's appeal regarding non-payment of service tax for the period from April 2009 to March 2010 on Renting of Immovable Property Service. The appellant argued that the impugned order was contrary to statutory provisions and judicial precedents. The appellant relied on the judgment of the Delhi High Court in a related case and subsequent amendments in the definition of 'service' in Budget 2010. The appellant contended that the non-payment was not intentional evasion but based on legal interpretations prevailing at that time (Para 3).

The appellant cited various decisions in support of their argument, emphasizing the legal ambiguity prior to the retrospective amendment in the definition of 'service' in Budget 2010. The appellant paid the service tax along with interest after the retrospective amendment but contested the penalty imposed. The appellant's consultant highlighted the bona fide belief held by the appellant regarding the taxability of Renting of Immovable Property Service (Para 3.1).

The Adjudicating Authority had confirmed the demand of service tax along with interest and penalty. However, the Tribunal, after considering submissions from both parties, observed that the appellant had ceased paying service tax based on the Delhi High Court's decision and subsequently paid after the retrospective amendment. The Tribunal noted the explanation in the Finance Bill 2010 regarding non-punishable acts or omissions due to amendments. The Tribunal found the appellant's belief regarding non-taxability to be genuine and dropped the penalty imposed, allowing the appeal (Para 5, 5.1, 6).

In conclusion, the Tribunal allowed the appeal, considering the appellant's actions in light of the legal developments and the bona fide belief held by the appellant. The penalty imposed was dropped based on the circumstances of the case and the retrospective amendment in the definition of 'service.' The decision was pronounced in open court on 24/03/2017.