2017 (8) TMI 794 - AT - Service Tax

Classification of services - non-profit organization mainly engaged in promotion of art and culture - Mandap Keeper Service or renting of immovable service - Held that - Admittedly, the appellants rented out their premises, halls and galleries for various functions like music programs, art exhibitions, class rooms in relation with art etc. The premises are admittedly rented out for temporary occupation. The usage is mostly official, social or business function. On perusal of the materials on record, we have no hesitation to hold that the appellant s activity is covered under tax entry of Mandap Keeper Service. Extended period of limitation - Held that - though the appellant took registration in March, 2008, they have not discharged service tax on all rental income received by them. They have chosen to pay service tax in respect of certain premises, excluding some other premises, on their own interpretation. We do not find any bonafide belief in such act - By applying the Provisions of Section 73(1) proviso, the demand can be issued for five years from the relevant date. As such, we find no infirmity in the present proceedings on limitation. Re-quantification of tax liability by applying Section 67(2) to consider the gross value inclusive of service tax - Held that - the same can be done on verification of invoices etc. issued by the appellant. The appeal is dismissed except for re-quantification - part matter on remand.

Summary

Issues: Liability of service tax under 'Mandap Keeper Service' for the period 2005-2006 to 2009-2010; Bonafide belief of the appellant regarding their classification and liability; Contestation of demand on limitation; Recalculation of tax liability by considering gross value inclusive of service tax.

The judgment deals with the appeal against an order confirming a service tax demand of ?15,12,837/- along with penalties imposed on a non-profit society engaged in art and cultural activities. The society contested its liability under the category of 'Mandap Keeper Service' for the period 2005-2006 to 2009-2010. The society, registered for service tax under renting of immovable property service, argued that it was not a 'Mandap Keeper' and thus not liable for the tax. The society believed that renting out art galleries for temporary displays would not attract service tax. The counsel for the society challenged the demand on limitation grounds, citing delayed issuance of the show cause notice (SCN) in 2010 after the society had submitted details in 2009. The Revenue argued that the activities of renting out premises for short durations clearly fell under Mandap Keeper Service and not renting of immovable property service. The Revenue contended that the society's activities, including renting out art galleries, were covered by Mandap Keeper Service. The tribunal noted that the society rented out premises for various functions temporarily, such as music programs and art exhibitions, falling under Mandap Keeper Service as per the relevant tax entry. The tribunal rejected the society's argument that its activities were better classified under renting of immovable property service.

Regarding the limitation issue, the tribunal found that the society had not paid service tax on all rental income despite registration in 2008, choosing to pay tax on certain premises only. The tribunal deemed this selective payment not based on a bonafide belief. It upheld the demand within the permissible time frame, noting that the Revenue initiated an inquiry in 2008, leading to the SCN in 2010. The tribunal found the proceedings legally sustainable within the five-year limit. The society had paid the full service tax liability with interest and 25% of penalties promptly after the original order. The tribunal dismissed the appeal, except for allowing re-quantification of tax liability by considering the gross value inclusive of service tax, which could lead to a reduction in penalties if applicable. The tribunal directed the original authority to verify the invoices to determine if the consideration received was all-inclusive of service tax for recalculating the tax liability.