2020 (10) TMI 291 - AT - Service Tax

Non-levy of penalty - Levy of service tax on renting of immovable property service - retrospective amendment - non-payment of service tax - non-filing of half yearly returns - demand alongwith the penalties - extended period of limitation - HELD THAT - The ld. Commissioner has given cogent reasons and has recorded the findings that there is no deliberate default on the part of the assessee, in not depositing the service tax. In this view of the matter, we uphold the non-levy of penalty under Section 78 and also dropping of the demand of service tax amounting to ₹ 58,85,465/- , in view of the stay granted by the Hon ble Supreme Court, being Interim Order dated 14.10.2011 in Civil Appeal No.8390 of 2011 and other appeals, in the case of Retailers Association of India Vs. Union of India Another 2011 (10) TMI 12 - SUPREME COURT . Penalties - HELD THAT - In view of the provisions of Section 76, which provides for levy of penalty, where a person is liable to pay service tax, fails to pay such tax and further, Section 80 provides that where such failure is for reasonable cause, no penalty shall be imposed under Section 76, 77 and 78 of the Finance Act - there being reasonable cause for late payment of service tax, we set aside the penalty under Section 76 also. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Liability of service tax on renting of immovable property.
2. Failure to obtain registration and pay service tax.
3. Imposition of penalties under Sections 76, 77, and 78.
4. Adjustment of tax paid by tenants against service tax liability.
5. Non-payment of service tax within the prescribed period.
6. Non-levy of penalty under Section 78.
7. Reasonable cause for late payment of service tax.

Analysis:

Issue 1: Liability of service tax on renting of immovable property
The case involved the liability of the respondent, engaged in renting immovable property services, to pay service tax as per notification no. 23/2007-ST. The dispute arose regarding the retrospective levy of service tax from 1.6.2007, leading to demands and penalties under Sections 76, 77, and 78.

Issue 2: Failure to obtain registration and pay service tax
The Revenue contended that the respondent failed to obtain registration under Section 69 and pay service tax amounting to ?4,53,94,367, leading to show cause notices for the periods 1.6.2007 to 31.12.2009 and 1.1.2010 to 31.12.2010. The respondent contested the notices citing various grounds, including ongoing legal challenges against the levy of service tax on renting of immovable property.

Issue 3: Imposition of penalties under Sections 76, 77, and 78
The Commissioner confirmed the tax liability and imposed penalties under Sections 76 and 77 for failure to file returns. However, penalties under Section 78 were not imposed considering the subjudice nature of the renting service tax levy before different High Courts and subsequent amendments reintroducing the levy retrospectively.

Issue 4: Adjustment of tax paid by tenants against service tax liability
The Revenue argued that the liability to pay service tax was shifted to service receivers, but the Commissioner reduced the service tax liability by the amount paid by tenants. The respondent contended that the tax paid by tenants should be adjusted against the determined service tax liability.

Issue 5: Non-payment of service tax within the prescribed period
The Revenue highlighted the non-payment of service tax within the prescribed period despite provisions for payment along with interest. The respondent argued that the ongoing litigation challenging the levy provided reasonable cause for not paying the tax promptly.

Issue 6: Non-levy of penalty under Section 78
The Revenue appealed against the dropping of the demand amount and non-imposition of penalties under Section 78. The Commissioner's decision was based on the ongoing legal challenges and the stay granted by the Supreme Court, leading to the relief granted to the respondent.

Issue 7: Reasonable cause for late payment of service tax
The respondent justified the delay in payment of service tax by citing the ongoing legal challenges against the levy, which created circumstances beyond their control. The Commissioner upheld the non-levy of penalties under Section 78 and Section 76 due to the reasonable cause for late payment.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the non-levy of penalties and dropping the service tax demand based on the reasonable cause for late payment and the stay granted by the Supreme Court. The decision was in favor of the respondent, granting them consequential benefits in accordance with the law.