2021 (3) TMI 1017 - HC - Service Tax

Levy of service tax - renting of immovable property Service - case of the petitioner in this writ petition is that it is a charitable institution recognised under the provisions of the Income Tax Act 1961 and therefore the petitioner cannot be saddled with service tax liability even if the petitioner was renting out its premises to business entities on the income generated by it is used for carrying out its charitable activities - HELD THAT - If the petitioner was of the view that it was not liable to tax in terms of the above notification it could have ignored the aforesaid letter/communication. The said communication was an innocuous communication merely nudging the petitioner to obtain registration and pay service tax or any alternative avail the benefit of the Voluntary Compliance Encouragement Scheme 2013. However the petitioner approached the first respondent for an individual exemption and thereafter filed the said writ petition. Pursuant to the aforesaid order in the said writ petition the impugned order has been passed. There was no necessity on the part of the petitioner to have filed the said writ petition and invited the above observation. If the petitioner felt that it was not liable to pay tax for renting of its immovable property based on the above Notification No. 25/2012-ST dated 20.6.2012 it should have ignored the persuasion of the officers of the Service Tax Department - petitioner shall thereafter give its reply explaining the reasons as to why it is not liable to pay service tax for renting of immovable property to the banks in terms of Notification No. 25/2012-ST dated 20.6.2012. The jurisdictional officer shall adjudicate the show cause notice without getting influenced by any of the observations in the impugned communication of the 1st/5th respondent which stands quashed. Petition disposed off.

Summary

Issues: Challenge to communication dated 23.03.2016 regarding service tax liability, exemption under Notification No. 25/2012-ST, necessity of filing writ petition, adverse observations, quashing of impugned order, issuance of show cause notice, adjudication process.

Analysis:
1. The petitioner challenged the communication dated 23.03.2016 regarding service tax liability, seeking exemption under Notification No. 25/2012-ST for renting property to business entities. The petitioner, a charitable institution, argued that it should be exempt from service tax due to its charitable activities.

2. The High Court noted that the petitioner had filed a previous writ petition (W.P.No.33773 of 2015) seeking exemption from service tax under a specific notification. The court had directed the tax authorities to consider the petitioner's representation and pass orders accordingly.

3. The first respondent, after the court's direction, issued the impugned communication stating that the petitioner was liable to pay tax, citing reasons such as the nature of service tax, government policy on exemptions, and utilization of tax revenue for welfare policies.

4. The court observed that the petitioner unnecessarily filed the writ petition challenging a mere communication from the tax authorities nudging it to obtain service tax registration or avail a compliance scheme. The court deemed the petitioner's approach as inviting adverse observations.

5. The court held that the impugned order, based on the court's direction in the previous writ petition, should be quashed. However, the jurisdictional officer was given liberty to issue a show cause notice to the petitioner within 60 days for adjudication.

6. The petitioner was directed to respond to the show cause notice, explaining why it believed it was not liable for service tax under the relevant notification. The adjudication process was to be completed within three months, allowing the petitioner to raise all defenses, including limitation.

7. The court clarified that the petitioner could raise defenses during the adjudication process, excluding the period of previous orders and the show cause notice issuance. The writ petition was disposed of with no costs, and the connected miscellaneous petition was closed.