2018 (12) TMI 949 - AT - Service Tax

Demand of interest and penalties - non-payment of service tax - rent received - Held that - There was delay in dispatch of the Order-in-Original and therefore the demand of interest cannot sustain. This argument is neither tenable nor acceptable. The demand of interest is correct and proper and therefore is upheld. Penalty u/s 78 - Held that - The appellant had not collected service tax from the tenants and that the matter was remanded by Commissioner (Appeals) to requantify the service tax liability giving cum-tax benefit. Taking note of this fact, it is established that the appellants were under the bonafide belief that they are not liable to pay service tax and were not collecting the service tax from the tenants. Further, there is no evidence to establish that they had suppressed facts with intention to evade payment of service tax - the penalty imposed under section 78 cannot sustain. Penalty u/s 77(2) of FA - non-filing of returns within the stipulated period - Held that - Since the appellant has later filed the returns and also paid the service tax and taking into consideration that the appellant is a Government wing, the penalty imposed under section 77(2) cannot sustain and requires to be set aside. Appeal allowed in part.

Summary

Issues:
Interest and penalties upheld in the impugned order regarding service tax on rent received by a religious trust.

Analysis:
The appellant, a religious trust, leased out property and was issued a show cause notice for service tax on rent received from January 2013 to September 2013. The original authority confirmed the demand, interest, and penalties under sections 78 and 77(2) of the Finance Act, 1994. In appeal, the Commissioner (Appeals) upheld the interest and penalties, leading to the current appeal.

The appellant argued that they were outside the purview of service tax before 2012 and were unaware of the obligation post-amendment. They contended that they had a good case on merits and paid the service tax upon receiving the Order-in-Original. The appellant claimed the delay in payment was due to a genuine belief in exemption as a government entity and religious trust. They emphasized the absence of fraud or willful suppression of facts and cited a Tribunal decision to support their case.

After hearing both sides, the Tribunal upheld the demand for interest but set aside the penalties. The Tribunal noted that the appellant did not collect service tax from tenants and was under a genuine belief of exemption, leading to the penalties being deemed unsustainable. The penalty under section 77(2) for non-filing of returns was also set aside since the appellant later filed returns and paid the service tax. Considering the appellant's status as a government wing, the penalties under sections 78 and 77(2) were overturned, while the rest of the order remained intact. The appeal was partly allowed with consequential relief, if any.

In conclusion, the Tribunal upheld the interest but set aside the penalties imposed under sections 78 and 77(2) on the religious trust for service tax on rent received, based on the genuine belief of exemption and absence of fraudulent intent or suppression of facts.