2018 (1) TMI 116 - AT - Service Tax

Renting of Immovable property service - local authority functioning under Chattisgarh Municipal Corporation Act 1956 - appellant had buildings/shops which were given out to people for running business in terms of Mukhyamantri Swalamban Yojna and similar such schemes - Held that - Renting of immovable property service is with reference to renting leasing licensing or other similar arrangement of immovable property for use in course for furtherance of business or commerce. .The exclusion given is with reference to renting of such property by religious body or education body. We could not find any exclusion from the tax entry which will apply to the appellants - We could not find any exclusion from the tax entry which will apply to the appellants. Renting of vacant land - land used for commercial construction for renting out - Held that - After 1.7.2010 the same will be liable to tax - reliance placed in the case of In The Matter of Greater Noida Industrial Development Auth. Versus Commissioner of Customs Central Excise And 6 Others 2015 (4) TMI 661 - ALLAHABAD HIGH COURT . Extended period of limitation - Held that - the appellant is a statutory authority functioning as a local Government. The nature and status of the appellant is such that there can be no allegation of malafide willful intend to evade government tax - the demand for the extended period cannot be sustained in the present facts of the case. Appeal allowed in part - the jurisdictional authorities directed to re-quantify the tax liability applying correct rate of tax for the material time.

Summary

Issues:
1. Tax liability of the appellant under the category of "Renting of immovable property" service.
2. Service tax liability on renting of vacant land.
3. Calculation errors in the quantification of demand.
4. Demand for the extended period and imposition of penalties.

Analysis:
1. The appeal addressed the tax liability of the appellant under the category of "Renting of immovable property" service. The appellant, a local authority under the Chattisgarh Municipal Corporation Act, rented out buildings/shops for commercial purposes under various government schemes. The Original Authority held the appellant liable for service tax and imposed penalties. The appellant argued that as a statutory local Government Authority, their activities were not for commercial purposes and thus not taxable. However, the Tribunal found that the shops were indeed used for business or commerce, making the appellant liable for tax under the category of "renting of immovable property."

2. The issue of service tax liability on renting of vacant land was also discussed. The appellant contended that the land provided was for commercial construction and renting out, which would be taxable post a certain date. The Tribunal referenced previous decisions to support the tax liability on such activities, emphasizing that after a specific date, the land would indeed be liable to tax.

3. The Tribunal acknowledged calculation errors in the quantification of demand, noting that incorrect rates of service tax were applied along with separate cesses. They directed the jurisdictional authorities to recalculate the tax liability with the correct tax rate, highlighting the need for accurate calculations in determining the tax demand.

4. The appellant challenged the demand for the extended period and the imposition of penalties. The Tribunal considered the nature and status of the appellant as a statutory authority, concluding that there was no malicious intent to evade taxes. Consequently, they held that the demand for the extended period was not sustainable and set aside the penalties, restricting the demand to the normal period as per Section 73(1).

In conclusion, the Tribunal upheld the tax demand for the normal period, directing a re-quantification of the tax liability with the correct tax rate. The appeal was disposed of with these terms, emphasizing the importance of accurate calculations and considering the appellant's status in determining tax liability and penalties.