2018 (12) TMI 505 - AT - Service Tax

Voluntary Compliance Entitlement Scheme - Department observed that the tax dues declared by the appellant were for the subsequent period on the same issue for which a show Cause Notice dated 04.01.2011 for the period w.e.f. 01.01.2009 to 31.03.2010 had already been issued - Held that - The demand in the impugned Show Cause Notice and the period in dispute is same. It becomes clear that the appellant has not disputed their liability of service tax amounting to ₹ 4,50,756/-, as demanded vide the present Show Cause Notice. No doubt the present Show Cause Notice was issued during the pendency of adjudication of the prior Show Cause Notice of 25.02.2014. But apparently it was issued after the proposal of rejection was confirmed vide original adjudicating authority s order dated 18.05.2015. With the said rejection, the immunity from interest and penalty as was available to the appellant under VCES Scheme was no more available to them. Irrespective of the said rejection, the fact remains is that the service tax of ₹ 4,50,756/- stands deposited with the Department since 30.12.2013. Hence, the issuance of impugned Show Cause Notice is apparently qua the demand which stands already deposited. Penalty - Held that - It is an apparently admitted fact that the Department has knowledge of non payment of the impugned demand since the year 2011. It is also being conceded by the Department that a confusion was prevalent during the impugned period qua the liability with respect to renting of immovable property services - penalty not warranted and is set aside. Order under challenge is sustainable only qua confirming the demand of interest on the amount of service tax of ₹ 4,50,756/-. Rest of the Order is set aside - appeal allowed in part.

Summary

Issues:
1. Validity of Show Cause Notice issued during the pendency of the rejection of VCES application.
2. Liability of service tax on renting of immovable property services.
3. Imposition of interest and penalty.
4. Adjudication of the Order-in-Original and rejection of VCES application.
5. Confusion regarding liability for service tax during the impugned period.

Issue 1: Validity of Show Cause Notice during VCES application rejection:
The appellant challenged the Show Cause Notice issued post the rejection of the VCES application, arguing that the notice was invalid due to the pending adjudication of the rejection order. The appellant contended that since the tax was paid under the VCES scheme, there was no intent to evade duty. The confusion regarding service tax liability during the period was highlighted, citing a High Court decision affecting tenant payments. The appellant sought to set aside the non-speaking order due to alleged ignorance of their submissions.

Issue 2: Liability of service tax on renting of immovable property services:
The Tribunal noted that a prior Show Cause Notice had proposed the rejection of the VCES application for service tax payment on renting of immovable property services. The appellant did not dispute the liability for the tax amount demanded in the subsequent Show Cause Notice. Despite the rejection of the VCES application, the tax amount had been deposited with the Department, inviting mandatory interest under Section 75 of the Finance Act. The Tribunal found no error in confirming the interest demand but deemed the demand unsustainable as the amount was already deposited.

Issue 3: Imposition of interest and penalty:
Regarding the imposition of penalty, the Department had knowledge of the non-payment since 2011, and confusion existed about the liability during the period in question. The appellant received the service tax from tenants in 2012 and deposited it under the VCES Scheme, which was later rejected. As there was no wilful misrepresentation or suppression of facts by the appellant, the Tribunal held that no penalty could be imposed under Section 73 of the Act. The Order imposing penalty was set aside.

Issue 4: Adjudication of the Order-in-Original and rejection of VCES application:
The Tribunal observed that the rejection of the VCES application led to the loss of immunity from interest and penalty under the scheme. Despite the rejection, the deposited tax amount was found to be already paid for the period in question. The Order-in-Original confirming the interest demand was upheld, while the rest of the Order was set aside.

Issue 5: Confusion regarding liability for service tax during the impugned period:
The confusion surrounding the liability for service tax during the impugned period was acknowledged. The Tribunal emphasized that the appellant's actions did not demonstrate wilful misrepresentation or suppression of facts, leading to the setting aside of the penalty imposition. The Order was sustained only concerning the demand of interest on the service tax amount, with the appellant's plea of limitation deemed inapplicable due to the mandatory nature of interest levy for delayed discharge of liability.

This detailed analysis of the judgment covers the various issues involved in the case, addressing the legal aspects and arguments presented by the parties.