2018 (2) TMI 650 - AT - Service Tax

Renting of Immovable Property Service - vires of levy of service tax under the category of Renting of Immovable Property Service - Held that - As per the rent deed agreement, M/s. Vishal Retail Limited was required to pay service tax on the renting of immovable property service, if so payable - The said levy of service tax has been held ultra-vires by the Hon ble High Court of Delhi in the case of Home Solution Retail India Limited Vs. UOI 2009 (4) TMI 14 - DELHI HIGH COURT wherein M/s. Vishal Retail Limited was also one of the petitioners. Therefore, the appellant was under the bonafide belief that as the vires of levy of service tax has been challenged and the same has been held as ultra-vires, it cannot be alleged against the appellant that they have not paid the service tax with malafide intention for the part of property let-out to M/s. Vishal Retail Limited. Extended period of limitation - Held that - nowhere it is coming out from the records that when the investigation was conducted by DGCEI against M/s. Vishal Retail Limited or against the appellant. In that circumstances, the benefit of doubt goes to the appellant therefore, the extended period of limitation is not invokable. Penalty - Held that - there is no malafide intention for not paying the service tax on the premise let-out to M/s. Vishal Retail Limited therefore, no penalty is imposable on the appellant. Appeal allowed in part.

Summary

Issues:
Appeal against confirmed service tax demand for Renting of Immovable Property Service for the period April 2008 to March 2012; Dispute over the invocability of the extended period of limitation and imposition of penalty.

Analysis:
The appellant, the owner of a property, appealed against the confirmed demand of service tax for Renting of Immovable Property Service from April 2008 to March 2012. The appellant had been paying service tax on the property but one tenant, M/S. Vishal Retail Limited, challenged the levy of service tax. Despite a retrospective amendment in 2010, the matter was sub-judice as the Hon’ble Delhi High Court had held the levy as ultra-vires. Show cause notices were issued to the appellant invoking the extended period of limitation. The appellant disputed the invocability of the extended period and the imposition of penalty.

The appellant's counsel did not dispute the levy of service tax but contested the invocability of the extended period of limitation and the imposition of penalty. The department argued that the extended period was rightly invoked as the appellant had not paid service tax on the property let out to M/S. Vishal Retail Limited until it was discovered during an investigation by the DGCEI.

After hearing both parties, it was found that the appellant had been paying service tax for other tenants but not for M/S. Vishal Retail Limited, based on a rent deed agreement. The appellant believed in good faith that as the levy of service tax was challenged and held ultra-vires by the Hon’ble Delhi High Court, they were not required to pay. Since there was no evidence of malafide intention or suppression of facts, the benefit of doubt was given to the appellant. Consequently, the demand for the extended period was set aside, and the demand within the limitation period was confirmed with interest. No penalty was imposed due to the lack of malafide intention on the appellant's part.

In conclusion, the appeal was partly allowed, setting aside the demand for the extended period and the penalty.