2020 (2) TMI 231 - HC - Service Tax

Condonation of delay in filing appeal before the tribunal - sufficient cause for delay or not - Classification of services - Renting of Immovable Property Service or not - Whether sufficient cause is shown for the condonation of delay? - HELD THAT - The delay deserves to be condoned, in the light of the contentions of the appellant that the reason for the delay is beyond the control of the appellant and that the said reason for the delay is on account of the ill health of the accountant and his leaving the job in June, 2014, without intimation, after having received the copy of the impugned order and placing it in audit file, which is not within the knowledge of the appellant. If the explanation is accepted and an opportunity is provided to have the cause in the proposed appeal decided on merits, the highest that would happen is that the cause would be decided on its merit after hearing the parties and in that view of the matter, it cannot be said that if the delay is condoned after accepting the explanation as a sufficient cause prejudice would be caused to the revenue/respondent herein. While considering the applications for condonation of delay, what is to be seen is whether the interest of revenue will stand protected, even while recognizing the right of the assesse to exercise the statutory remedies available to the assesse and the statutory right of appeal cannot be made redundant by dismissing the application for condonation of delay on technical grounds. This is a fit case for condonation of delay and affording an opportunity to the appellant to have the intended appeal decided on its merit by the CESTAT. Hence, the impugned order is liable to be set aside and that such a course sub-serves the ends of justice. Appeal allowed.

Summary

Issues Involved:
1. Classification of services under "Renting of Immovable Property Service."
2. Demand for service tax and education cess.
3. Justification for condonation of delay in filing the appeal.
4. Arguments for and against the condonation of delay.
5. Legal precedents and principles regarding condonation of delay.

Detailed Analysis:

1. Classification of Services under "Renting of Immovable Property Service":
The appellant was issued a show cause notice requiring justification as to why the services of renting shopping complexes and other immovable properties should not be classified as "Renting of Immovable Property Service" under Section 65(90a) read with Section 65A of the Finance Act, 1994.

2. Demand for Service Tax and Education Cess:
The show cause notice demanded:
- ?7,26,523/- as service tax for the period from 1.6.07 to 30.6.09.
- ?14,531/- as education cess.
- ?7,265/- as secondary and higher education cess.
- Interest under Section 75 of the Finance Act, 1994.
- Penalty under Sections 76, 77, and 78 of the Finance Act, 1994 for failure to pay service tax, failure to take registration within the prescribed time, and failure to file periodical returns.

The adjudicating authority confirmed these demands, which were upheld by the appellate authority and subsequently by the CESTAT.

3. Justification for Condonation of Delay in Filing the Appeal:
The appellant sought condonation of a 1164-day delay in filing the appeal before the CESTAT, attributing the delay to mishandling by an employee who left the job without intimation. The appellant argued that the delay was neither willful nor wanton and was due to circumstances beyond their control.

4. Arguments for and Against the Condonation of Delay:
Appellant's Arguments:
- The appellant had already paid a substantial amount of ?4,08,878/- out of the total tax demand of ?7,48,319/-.
- The delay was caused by the ill health and sudden departure of the accountant responsible for tax matters.
- The security deposit received should not be treated as rental income and thus not subject to service tax.
- Refusal to condone the delay would result in a meritorious matter being thrown out at the threshold, denying justice.
- Cited precedents supporting a liberal approach towards condoning delays to achieve substantial justice.

Respondent's Arguments:
- The appellant had not declared the details of services provided and the amounts received.
- The delay of 1164 days was too long and the explanation provided was sketchy.
- The appellant continued business operations without interruption during the period of delay.
- Cited precedents emphasizing that condonation of delay is a matter of discretion and should not be granted lightly.

5. Legal Precedents and Principles Regarding Condonation of Delay:
The court referred to settled propositions on condonation of delay, emphasizing that:
- The words "sufficient cause" should receive a liberal construction to achieve substantial justice.
- The court should balance the interests of both parties and not condone delay where there is no justification.
- Length of delay is immaterial if the explanation is acceptable.
- The statutory right of appeal should not be rendered redundant by dismissing applications for condonation of delay on technical grounds.

Conclusion:
The court found that the appellant had shown sufficient cause for the delay, which was beyond their control due to the ill health and departure of the accountant. The substantial amount of tax already paid by the appellant and the potential for a meritorious appeal justified condoning the delay. The court set aside the CESTAT's order, allowed the application for condonation of delay, and directed the CESTAT to hear the appeal on its merits.

Order:
The Central Excise Appeal is allowed, the delay in filing the appeal is condoned, and the CESTAT is directed to hear and dispose of the appeal on its merits. No order as to costs. Miscellaneous petitions, if any, are closed.