2023 (9) TMI 871 - AT - Service Tax

Liability of appellant to pay service tax or not - appellant is registered under the Societies Registration Act, 1860 and is under the direct control of the Bishop of Tanjore - Public Charitable and Educational Society can also be a religious body or not - religious body eligible to be exempt from tax till 01/07/2012 when the negative list-based levy came into force or Public Charitable and Educational Society and not a religious body as claimed by Revenue and come under the levy in terms of sec. 65(90a) of the Finance Act, 1994 from 01/06/2007? - extended period of limitation. HELD THAT - From the statement and the objects and purpose of the Diocese as seen from the Memorandum of Association it is clear that it includes religious activity apart from other activities like charity, social service, etc. These activities are primarily for members of the Catholic community while members of other communities are not excluded. The income of the society is exempted under section 11 of the Income Tax Act 1961. The Hon ble Supreme Court examined the definition of religious denomination in the landmark judgment of THE COMMISSIONER, HINDU RELIGIOUS ENDOWMENTS, MADRAS VERSUS SRI LAKSHMINDRA THIRTHA SWAMIAR OF SRI SHIRUR MUTT. 1954 (4) TMI 29 - SUPREME COURT . It was held that a denomination is a collection of individuals, classed together under the same name; now almost always specifically, specially a religious sect or body having a common faith and organisation and designated by a distinctive name. The definition of a religious body has to be broader than that of a religious denomination . A religious denomination is a subgroup within a religion. Religious body can be a part of a religion or a religious denomination and established with the objective of propagating religion and primarily serving the members of its community. Religions are generally propagated and administered with the help of organizations within its domain that are closely integrated with society. These organisations are understood in common parlance to be religious bodies as distinct from religion per se or a religious denomination. Hence, they are recognised by the public and societal institutions as a religious body. The onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee or upon a party claiming benefit under a notification, but in the case of subjecting an activity to levy under a taxing statute, the onus is on Revenue. Merely because the Diocese is registered under the Societies Registration Act, 1860, it cannot be said that it automatically means that the Diocese is not a religious body - Revenue has failed to establish that the Diocese is not a religious body and will be covered by the definition under section 65(90a) of the Finance Act 1994 - appellant will be subject to levy under service tax for renting of immovable property only from 01/07/2012 and not before that date. The appellant also agrees that they are liable to pay service tax from 01/07/2012. Extended period of limitation - HELD THAT - The owners were under the bonafide belief that the said activity would not attract service tax liability. In a case where the constitutional validity of the levy is yet to be decided the dispute is interpretational in nature - the appellant agreed upon hence invocation of extended period is not justified. The demand and interest are hence to be restricted to the normal period and the penalties are to be set aside - appeal allowed in part.

Summary

Issues Involved:
1. Liability to Service Tax on Renting of Immovable Property by a Religious Body.
2. Applicability of Extended Period of Limitation.
3. Demand for Interest and Penalties.

Summary:

1. Liability to Service Tax on Renting of Immovable Property by a Religious Body:
The appellant, registered under the Societies Registration Act, 1860, argued that it is a religious body under the direct control of the Bishop of Tanjore, primarily engaged in religious, educational, and charitable activities. It claimed exemption from service tax on renting of immovable property up to 30.06.2012 under section 65(90a) of the Finance Act, 1994, which excludes renting by or to a religious body. The Tribunal examined the definition of a "religious body" and concluded that the Diocese is infused with the character of a religious body, as it engages in religious activities and is recognized as such in common parlance. The Tribunal referenced several judgments, including *The Commissioner Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt* and *Hindu Public v. Rajdhani Puja Samithee*, to support this conclusion. Consequently, the appellant was found liable for service tax only from 01.07.2012 when the negative list-based levy came into force.

2. Applicability of Extended Period of Limitation:
The appellant contended that the constitutional validity of the levy on renting of immovable property was under dispute and pending before the Supreme Court in *Union Of India vs UTV News Ltd.*, leading to a bona fide belief that the activity would not attract service tax liability. The Tribunal agreed, stating that the dispute was interpretational in nature, and hence, the invocation of the extended period was not justified.

3. Demand for Interest and Penalties:
The Tribunal noted that interest on the duty due arises automatically by operation of law, as per the Supreme Court judgment in *Commissioner of Central Excise, Pune Vs M/s SKF India*. However, the demand and interest were restricted to the normal period, and all penalties were set aside.

Conclusion:
The impugned order was partially modified, limiting the demand for duty and interest to the normal period and setting aside all penalties. The appeal was allowed with consequential relief as per law.