2019 (4) TMI 1559 - AT - Service Tax

Classification of services - shops and outlets constructed by the Mandi Samiti various places are being given on rent/fee to various traders and farmers for sale purchases of the agriculture produces - whether classified under renting of immovable property service or otherwise? - Extended period of limitation - HELD THAT - The matter got clarify only after the Central Board of Excise Customs has clarified the issue vide Circular No. 157/8/2012-ST dated 27 April 2012 wherein it was provided that activities undertaken by the APMCs are not covered under service tax leviability except renting of the shops in the market area etc. Extended period of limitation - HELD THAT - The department was already aware of this matter as necessary enquiries have been made by them in the month of July 2011 itself and before that we also feel that the necessary ingredients for invoking the extended time proviso under Section 73 of Finance Act, 1994 for demanding service tax are not present in the circumstances of this case and, therefore, we feel that the demands should have been restricted to the normal period of demand. Penalty - HELD THAT - There are no valid grounds for imposing penalty on the appellant as the circumstances under which the non-payment of the service tax has occurred can easily be covered by the provisions of Section 80 of the Finance Act, 1994. The demand of service tax in this case need to be restricted to normal period of demand - appeal allowed in part.

Summary

Issues:
1. Whether the renting of shops and outlets by a Mandi Samiti attracts service tax under the category of renting of immovable property.
2. Whether the extended time proviso under Section 73 of the Finance Act, 1994 is justifiable in this case.
3. Whether penalties under Section 76, 77, and 78 of the Finance Act are justified in the given circumstances.

Analysis:

Issue 1:
The case involved a Mandi Samiti established by the Madhya Pradesh State Government for facilitating the sale of agricultural produce. The department alleged that the rent collected by the appellant from traders and farmers for renting shops and outlets falls under the category of renting of immovable property, attracting service tax. The Central Board of Excise & Customs clarified that renting of shops by APMCs is covered under the service tax category. The appellant, upon receiving the show cause notice, deposited the service tax amount. The Tribunal found that the demands should have been restricted to the normal period of demand under Section 73, as the circumstances did not warrant invoking the extended time proviso.

Issue 2:
Regarding the extended time proviso under Section 73, the Tribunal held that there were no grounds for its invocation in this case. The department was already aware of the matter, and the necessary ingredients for demanding service tax under the extended period were not present. The Tribunal referred to a previous decision involving a similar issue and held that penalties under Section 76, 77, and 78 were not justified in this case.

Issue 3:
The Tribunal considered the penalties imposed on the appellant as unjustified, given the circumstances surrounding the non-payment of service tax. Referring to a previous Tribunal decision, the Tribunal held that the penalties should be set aside, and the demands for service tax should be restricted to the normal period under Section 73. The matter was remanded back to the Original Adjudicating Authority for re-adjudication.

In conclusion, the Tribunal disposed of the appeal by restricting the demand for service tax to the normal period under Section 73 and ruled out the imposition of penalties under Section 76, 77, and 78. The decision was based on the lack of grounds for invoking the extended time proviso and the circumstances surrounding the case, as clarified by relevant legal provisions and previous judicial decisions.