2023 (12) TMI 122 - AT - Service Tax

Levy of Service Tax - Renting of Immovable Property Service - renting of quarters by the Appellant to the employees of the contractors for residential purposes - HELD THAT - It is observed that the term immovable property for the purpose of levying service under the category of Renting of immovable property does not include building solely used for residential purpose. The quarters rented out by the appellant were only used for residential purpose and not as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings so as to constitute for use in the course of furtherance of business. Thus the activity of renting of quarters for residential purpose would not be liable to service tax. It is a settled legal position that the renting of immovable property for residential purpose is not liable to service tax - In the instant case the appellant has only provided its quarters on rent for residential purpose to the employees of its contractors. The said quarters were also supposed to be provided on rent subject to availability. It is held that the demand of Rs.20,83,934/- along with interest confirmed in the impugned order under the category of 'Renting of Immovable Property Service' is not sustainable. Since the demand itself is not sustainable, the demand of interest and imposition of penalty on this amount is also not sustainable. Imposition of penalty of Rs. 32,26,018/- under Section 78 of the Finance Act - HELD THAT - The Appellant has paid the service tax of Rs. 32,26,018/- along with interest before issue of the Notice. The remaining service tax of Rs.20,83,934/- has also has been held as not payable - As per Section 73(3) of the Finance Act, no need to issue Notice in such cases where service tax along with interest has been paid before issue of Notice. Thus, this is a fit case for invoking Section 80 of the Finance Act, 1994 to waive the penalty. Accordingly, the entire penalty imposed by invoking section 80 of the Finance Act, 1994 set aside. Thus, the demand of service tax of Rs.20,83,934/-pertaining to 'Renting of immovable property service' confirmed in the impugned order set aside - the entire penalty of Rs. 53,09,952/- imposed in the impugned order also set aside by invoking section 80 of the Finance Act, 1994 - appeal allowed in part.

Summary

Issues involved:
The appeal against the Order-in-Original confirming demands for various services including Renting of Immovable Property Service, contesting the demand, interest, and penalties imposed.

Renting of Immovable Property Service:
The appellant, a PSU distributing electricity, contested a service tax demand on renting quarters to contractors' employees for residential purposes. The appellant argued that renting solely for residential purposes is not liable to service tax. The tribunal agreed, citing a precedent where residential accommodation use by contractor employees did not constitute furtherance of business. The demand of Rs.20,83,934/- was deemed unsustainable, leading to the waiver of interest and penalties.

Penalties under Section 78 and Section 80:
The appellant argued for the waiver of penalties under Section 78 of the Finance Act, stating that service tax with interest was paid before the notice. The tribunal agreed, invoking Section 80 of the Finance Act to waive the entire penalty of Rs. 53,09,952/-. The demand for service tax and penalties were set aside, modifying the impugned order accordingly.