2023 (1) TMI 544 - AT - Service Tax

Levy of Service tax - Business Auxiliary Service or not - sharing of revenue - giving property for temporary rent to generate income to boost its charitable activities - principles of Revenue Neutrality - extended period of limitation - HELD THAT - The Service Tax was demanded on the sharing of receipt from the total receipt of the contractor. The contractor provided the service of Mandap keeper to his client in the premises of the appellant. Therefore, out of the Mandap keeper service as per their understanding sharing of the appellant was given. As regard the issue that whether the Service Tax is payable on mere sharing of consideration towards service will not prima facie amount to provision of any service on the part of the appellant - the appellant had a bona fide belief in non payment of Service Tax. The appellant also submitted that this case is falling under the principle of revenue neutrality in as much as the tax payment if any made by the appellant is available as the Cenvat credit to the contractor who has used the premises of the appellant. Extended period of limitation - HELD THAT - The suppression of fact and mala fide cannot be attributed against the appellant. Accordingly, the demand is hit by limitation as extended period could not have been invoked in the fact of the present case. The demand is set aside on the ground of limitation itself - appeal allowed.

Issues:
- Whether Service Tax is payable on the sharing of consideration towards service provided by the appellant?
- Whether the demand for Service Tax is hit by limitation?
- Whether penalty is imposable on the appellant for non-payment of Service Tax and renting income?

Analysis:

Issue 1: Service Tax on sharing of consideration
The appellant, a registered trust providing property on rent for charitable activities, was involved in a dispute regarding the Service Tax liability on the sharing of receipts from a contractor providing services on the appellant's premises. The Tribunal noted that the appellant did not directly provide any service but shared in the contractor's receipt for Mandap keeper services. It was held that mere sharing of consideration does not amount to the provision of a service by the appellant. The Tribunal found that the appellant had a bona fide belief in not paying Service Tax and that the case fell under the principle of revenue neutrality, as any tax paid by the appellant was available as Cenvat credit to the contractor. Consequently, the demand for Service Tax was set aside on the grounds of limitation, as the extended period could not be invoked in this scenario.

Issue 2: Limitation of the demand
The Tribunal determined that the demand for Service Tax was hit by limitation due to the appellant's genuine belief in not being liable to pay the tax. It was established that there was no suppression of facts or mala fide intent on the appellant's part, as the tax payment, if any, was available to the contractor as Cenvat credit. Therefore, the demand was considered time-barred, and the impugned order was modified accordingly.

Issue 3: Imposition of penalty
Regarding the imposition of penalties on the appellant for non-payment of Service Tax and renting income, the Tribunal found in favor of the appellant. It was observed that there was no mala fide intent on the appellant's part, and the case was deemed to be revenue neutral due to the availability of Cenvat credit to the contractor. Consequently, the Tribunal held that penalties were not imposable, and the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for Service Tax on the sharing of consideration, citing the principle of revenue neutrality and the absence of mala fide intent. The limitations on the demand were upheld, and penalties were deemed inapplicable due to the circumstances of the case.

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