2023 (9) TMI 931 - AT - Service Tax

Levy of penalty - entire service tax liability along with interest paid - Renting of immovable property service - constitutional validity of the levy is yet to be decided - dispute is interpretational in nature - applicability of section 80 of the Finance Act, 1994 - HELD THAT - Renting of Immovable Property Services have been brought under the purview of Service tax with effect from 1.6.2007. Hon'ble High Court of Delhi, in the case of HOME SOLUTIONS RETAILS LTD VERSUS UOI AND ORS 2010 (5) TMI 3 - DELHI HIGH COURT held that renting per se cannot be regarded as service. Hence, no service tax could be levied on the activity of renting per se. Subsequently changes made by the Finance Act, 2010 in respect of enlargement of scope of Renting of Immovable Property Services' was challenged by the assessees PAN India and during the impugned period, the courts had taken a view that the amendment was unconstitutional and had even granted a stay in this regard. Further, the Apex Court vide its order in UNION OF INDIA AND ORS. VERSUS UTV NEWS LTD. 2018 (5) TMI 1367 - SUPREME COURT , while examining a question directly relatable to the scope and ambit of Entry 49 of List II of the Seventh Schedule to the Constitution of India dealing with Taxes on lands and buildings has categorically ordered all the cases on this issue to be deferred until the matter before the nine judges Bench in MINERAL AREA DEVELOPMENT AUTHORITY ETC. VERSUS M/S STEEL AUTHORITY OF INDIA ORS 2011 (3) TMI 1554 - SUPREME COURT is decided. In a case where the constitutional validity of the levy is yet to be decided the dispute is interpretational in nature. Hence reasonable cause has been made out for delayed payment of duty. In fact, due to legal complexities, the appellants are in the second round of litigation before this Tribunal. The part of the impugned orders passed by the Commissioner of Central Tax (Appeals), Coimbatore relating to penalties alone are set aside and the appeals are allowed.

Summary

Issues involved:
The issues involved in this case are related to the imposition of penalties on the appellants in the context of "Renting of Immovable Property Service" and the applicability of service tax demand along with interest under the category of 'Renting of Immovable Property Services' for the period from 1.6.2007 to 31.3.2012.

Imposition of penalties:
The appellants had already paid the entire service tax liability along with interest and were disputing only the imposition of penalties. The learned consultant for the appellants argued that penalties should be waived, citing precedents where penalties in similar circumstances were waived by invoking the provisions of sec. 80 of the Finance Act, 1994. On the other hand, the learned Additional Commissioner (AR) supported the findings in the impugned order, stating that the penalties may be confirmed as the authorities rightly invoked the extended period for detection of the violations.

Legal complexities and reasonable cause for delayed payment:
The Tribunal considered the legal complexities surrounding the taxation of "Renting of Immovable Property Services" and the constitutional validity of the levy. It was noted that the High Court of Delhi had held that renting per se cannot be regarded as a service, and changes made by the Finance Act, 2010 were challenged by assessees nationwide during the relevant period. The Apex Court had also deferred cases related to this issue pending a decision on constitutional matters. Due to these legal uncertainties, the Tribunal found that a reasonable cause had been established for the delayed payment of duty. Consequently, the invocation of penalties was deemed unjustified under section 80 of the Finance Act, 1994.

Judgment:
The Tribunal set aside the part of the impugned orders related to the imposition of penalties and allowed the appeals with consequential relief, if any, as per law. The appeals were disposed of accordingly, with the decision pronounced in open court on 20.9.2023.