2023 (11) TMI 166 - AT - Service Tax

Short payment of service tax - Management Consultancy Service - non-payment of service tax on Renting of Immovable Property - Point of Taxation Rules, 2011 by Notification No. 18/2011-S.T., dated 1-3-11 which was further amended by Notification 25/2011-S.T., dated 31-3-11 - Time limitation - HELD THAT - During the disputed period there is no clear provision in Finance Act, 1994 as to the date with reference to which rate of tax is applicable for calculating service tax. However, this lacuna was removed by Point of Taxation Rules, 2011 by Notification No. 18/2011-S.T., dated 1-3-11 which was further amended by Notification 25/2011-S.T., dated 31-3-11 - In the present disputed matter the appellant raised the invoice on 30.04.2009 and payment towards the services of Management Consultancy Services was also received in July 2009 when rate of service tax was @10%, therefore in our view appellant had rightly paid the service tax under the category of Management Consultancy Services at 10%. The rate of tax is applicable on the date when the appellant was liable for pay Service tax to the department. It is clear that the rule of POT is not applicable in a case where service was provided and invoice was issued prior to introduction of Point of Taxation Rules, 2011 - the impugned order confirming the differential service tax demand in respect of Management Consultancy Service is not sustainable. Time Limitation - HELD THAT - Admittedly the tax liability on this particular tax entry has been a subject matter of substantial litigation. At the relevant time the chargeability of service tax on renting of immovable property was sub-judice before various judicial forum - In fact, the Hon ble Delhi High Court in the case of HOME SOLUTIONS RETAILS (INDIA) LTD. VERSUS UNION OF INDIA ORS 2011 (9) TMI 46 - DELHI HIGH COURT held that the activity of the rent per se cannot be subjected to Service Tax levy, whereas the activities in relation to renting are liable to Service Tax. The decision of the Delhi High Court led to legislative changes including retrospective amendment of the concerned legal provisions in the Finance Act, 1994. The ingredients for invoking demand for extended period are not present in the present case. Accordingly, the demand raised on Renting of Immovable Property shall be restricted to normal period only - the impugned order is set aside. Appeal allowed.

Summary

Issues involved:
The issues involved in this case are related to the short payment of service tax under "Management Consultancy Service," the failure to pay service tax on "Renting of Immovable Property," the imposition of penalties under various sections of the Finance Act, 1994, and the applicability of the Point of Taxation Rules 2011.

Management Consultancy Service:
During the audit, it was found that the appellant had made a short payment of service tax under the category of "Management Consultancy Service." The appellant had charged service tax on bills raised to a company, but half of the services were provided before a change in the service tax rate, resulting in a difference in payment. The appellant contested that the Point of Taxation Rules 2011 should apply, and the service tax was correctly paid at the applicable rate.

Renting of Immovable Property:
The appellant did not pay service tax on "Renting of Immovable Property" provided to another company. The appellant argued that the issue of service tax on renting of immovable property was sub-judice before various courts, and immediate payment was made upon being pointed out by the audit team. The tribunal found that the demand for extended period was not justified, and the demand was restricted to the normal period only.

Penalties and Limitation:
Penalties under various sections of the Finance Act, 1994 were proposed to be imposed, but the Commissioner (Appeals) partially allowed the appeal by dropping some penalties. The appellant argued that the show cause notice issued was beyond the limitation period, and the tribunal found merit in the appellant's limitation argument. The tribunal also considered the benefit under Section 73(3) and extended relief to the appellant based on previous judgments.

Applicability of Point of Taxation Rules 2011:
The tribunal analyzed the provisions of the Point of Taxation Rules 2011 and found that the appellant had correctly paid the service tax under the category of "Management Consultancy Services" as per the applicable rate at the time of payment realization. The tribunal concluded that the impugned order confirming the differential service tax demand for "Management Consultancy Service" was not sustainable and decided in favor of the appellant.

Conclusion:
The tribunal set aside the impugned order, allowed the appeal in favor of the appellant regarding the issues of "Management Consultancy Service" and "Renting of Immovable Property," and provided consequential relief as per law. The tribunal considered the arguments presented by both sides and made a detailed analysis of the legal provisions and previous judgments to arrive at its decision.