2019 (11) TMI 495 - AT - Service Tax

Maintainability of appeal - non-payment of pre-deposit - section 35F (1) of the Central Excise Act 1944 - Imposition of penalty - renting of immovable property - duty demand against renting of immovable property with retrospectively effect from 1-6-2007 for the period between 2008-09 and 2011-12 - extended period of limitation - HELD THAT - It is observed that Learned Commissioner (Appeals) had dismissed the appeal before him under section 35F (1) of the Central Excise Act 1944 for non-payment of pre-deposit at the required rate and simultaneously also discussed on the merit of the appeal. Going by the statutory provision contained in section 35F (1), he should not have entertained the appeal for hearing without payment of pre-deposit and in such a case merit of the appeal should not have been discussed since the same amount to admission of appeal and its disposal on merit. Further, section 80 (2), as was existing during the relevant period permits non imposition of penalty if service tax payable as on 6-3-2012 was paid along with interest in full within six months of Finance Act 2012 coming into force. However, going by the provision containing in section 80(1), which is applicable to the present case of the appellant since there is reasonable cause for the failure on the part of the appellant in non-payment of service tax during the period of hegemony of taxability on renting of immovable property, no penalty is leviable on the appellant. The order passed by Commissioner (Appeals) Central Excise GST, Nagpur to the extent of imposition of penalty of ₹ 28,61,269/- u/s 78 of the Finance Act is here by set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Legality of confirmation of equivalent penalty by the Commissioner (Appeals) invoking extended period on duty demand against renting of immovable property with retrospective effect.

Analysis:

1. Background and Duty Demand:
The appellant provided "renting of immovable property service" and was audited for the period between 2008-09 and 2011-12. An amount of &8377; 28,61,269/- was observed as payable, which was paid before the show cause notice. However, the order-in-original confirmed the demand with interest and equivalent penalty. The Commissioner (Appeals) upheld this decision based on non-payment of pre-deposit and non-payment of interest within a specified period.

2. Constitutionality Challenge and Legal Submissions:
During the appeal hearing, the appellant's counsel challenged the imposition of service tax on renting of immovable property, citing a favorable High Court judgment later overruled. The appellant argued that uncertainty prevailed during the relevant period and referred to a case supporting their position.

3. Department's Response:
The Department contended that the appellant suppressed services by not disclosing them in returns and not informing the Department about the payment of service tax with interest. They invoked the extended period for imposing penalty equivalent to the duty demand.

4. Tribunal's Observations and Legal Analysis:
The Tribunal noted that the Commissioner (Appeals) should not have entertained the appeal without the required pre-deposit as per statutory provisions. It was highlighted that under section 80(1), no penalty is leviable if there is a reasonable cause for non-payment of service tax. Referring to a relevant case, the Tribunal emphasized the substantial litigation regarding tax liability on renting of immovable property.

5. Final Judgment:
The Tribunal allowed the appeal and set aside the imposition of the penalty of &8377; 28,61,269/- under section 78 of the Finance Act by the Commissioner (Appeals). The decision was based on the legal provisions and the judicial precedent set by the Tribunal in similar cases.

In conclusion, the Tribunal's decision favored the appellant based on the legal arguments presented, highlighting the complexities surrounding the taxation of renting immovable property and the applicable provisions under the Finance Act.