2017 (11) TMI 290 - AT - Service Tax

Interest - penalty u/s 77 and 78 - non-payment of service tax - bonafide belief - Held that - the liability under renting of immovable property service was challenged and the same is still pending before the apex court, in these circumstances, appellant had a bona fide belief that they are not liable to pay service tax, but thereafter they paid the same - the appellants are entitled for the benefit of Section 80 of the Finance Act, 1994 and by resorting to Section 80, penalty u/s 77 and 78 waived - But as far as interest liability is concerned, the appellants are liable to pay the interest as per the provisions contained in Section 75 of the Finance Act, 1994 - appeal allowed in part.

Summary

Issues Involved:
Appeal against impugned order upholding Order-in-original and dismissing appeal - Service tax on renting of immovable property - Appellant's contention of non-liability based on legal disputes and bona fide belief - Applicability of penalty and interest under Sections 77, 78, and 75 of Finance Act, 1994.

Analysis:

1. Impugned Order and Legal Dispute:
The appeal was directed against the impugned order upholding the Order-in-original, confirming service tax liability of ?4,15,043 for renting out shops for commercial purposes from 01/06/2007 to 31/12/2009. The appellant contended that the impugned order misinterpreted the law and ignored judicial precedents. The appellant argued that being a non-profiteering organization, there was no intent to evade payment. Reference was made to legal disputes regarding service tax on renting of immovable property, citing the case of Home Solution Retail India Ltd. vs. UOI. The appellant claimed a bona fide belief in non-liability for service tax.

2. Appellant's Submissions and Legal Precedents:
The appellant's counsel argued that there was no evidence of intentional withholding of information to evade tax. The appellant relied on decisions like LMJ Service Ltd. vs. CCE&ST, Jaipur-II and Shantilal Nensukh Khothari vs. CCE, Pune-III to support the claim of non-liability. The appellant maintained that they paid the service tax based on a genuine belief that it was not applicable to renting of immovable property services.

3. Revenue's Position and Tribunal's Decision:
The Revenue reiterated the findings of the impugned order. The Tribunal considered the ongoing legal challenge regarding the liability under renting of immovable property services. Acknowledging the appellant's bona fide belief, the Tribunal invoked Section 80 of the Finance Act, 1994 to waive penalties under Sections 77 and 78. However, the Tribunal held the appellant liable to pay interest under Section 75 of the Act. Consequently, the appeal was partly allowed, setting aside penalties while confirming the interest liability.

4. Operative Portion of the Order:
The Tribunal pronounced the operative portion of the order on 06/09/2017, granting relief to the appellant by waiving penalties but confirming the liability for interest. This decision was based on the appellant's genuine belief in non-liability for service tax on renting of immovable property services amidst ongoing legal disputes.

This detailed analysis highlights the legal arguments, precedents, and the Tribunal's decision regarding the service tax liability on renting of immovable property, emphasizing the appellant's bona fide belief and the applicability of penalty and interest provisions under the Finance Act, 1994.