2018 (5) TMI 879 - AT - Service Tax

Renting of immovable propriety service - appellant is a Nagar Palika Nigam, Katni which has let out some shops and commercial properties on lease rent - whether the service tax was chargeable on the lease rent under the category of Renting of Immovable Property or not? - Held that - the chargeability of service tax on immovable property was the subject matter of serious dispute and the Hon ble Delhi High Court had reversed its own decision in the case of Home Solutions Retails (India) Ltd. Vs. Union of India 2011 (9) TMI 46 - DELHI HIGH COURT in 2012 - The legal development also necessitated the retrospective amendment in Finance Act, 1994, which was carried out in Finance Act, 2010. The service tax liability cannot be fastened on the appellant for the extended period of 5 years - Further, the appellant being a local authority cannot be held guilty of the charge of mala fide intention to evade payment of service tax. Demand for normal period upheld - penalty set aside - matter is remanded to the adjudicating authority for requantification of the matter - appeal allowed in part by way of remand.

Summary

Issues:
1. Condonation of delay in filing the appeal before the Tribunal.
2. Service tax liability on renting of immovable property.
3. Dispute regarding the period for which service tax demand is applicable.
4. Applicability of retrospective amendment in Finance Act, 2010.
5. Liability of a local authority to pay service tax.
6. Penalty imposition and remand for requantification.

Analysis:
1. The appellant filed an appeal before the Tribunal, which was initially declared defective, causing a delay in its admission. The delay was condoned, and the appeal was taken on record, allowing COD.

2. The dispute centered around whether service tax was chargeable on the lease rent of shops and commercial properties under "Renting of Immovable Property." The appellant, a Nagar Palika Nigam, challenged the service tax demand raised by the revenue department.

3. The appellant contended that the issue of service tax on renting of immovable property was debatable, citing a previous decision of the Delhi High Court. The appellant argued that the demand for service tax for an extended period was not justified, as they were willing to pay for the period within the normal time limit.

4. The Tribunal considered the legal developments, including the retrospective amendment in the Finance Act, 2010, regarding the taxability of service tax under renting of immovable property. It held that the service tax liability could not be imposed on the appellant for the extended period of 5 years.

5. The Tribunal noted that the appellant, being a local authority, could not be deemed to have a mala fide intention to evade payment of service tax. It upheld the demand for service tax within the normal time limit and set aside the penalty imposed, invoking Section 80.

6. The Tribunal partially allowed the appeal, remanding the matter to the adjudicating authority for requantification, considering the legal developments and the appellant's willingness to pay the tax within the normal time limit.