2024 (3) TMI 797 - AT - Service Tax

Recovery of service tax alongwith interest and penalty - admissibility of the exemption under Notification no 6/2005-ST - benefit denied on the ground that appellant have in their ST-3 return shown certain amounts as CENVAT credit - Renting of Immovable Property service - suppression of facts or not - invocation of Extended period of Limitation - HELD THAT - The ST-3 return which has been relied upon by making the demand, against the appellant is for the period April 2008 to September 2008. As per this return the appellant have indicated the Opening Balance for the month of April 2008 as Rs 61,711/- and the credit taken during the month as Rs 1,66,326/-. The breakup of this credit taken during the month of April 2008 was also indicated in the chart enclosed with ST-3 return. On going through the said chart it is quite evident that the appellant had availed the CENVAT Credit in respect of certain documents, which were dated much before the 1st April 2008. The fact of taking the credit against these documents was reflected in ST-3 return and enclosed chart, filed with the range officer 20.10.2008. While acknowledging the said return, superintendent has observed on 23.10.2008 stating Defective ST-3 on account of CENVAT Credit in ST-3 of Transport of Goods . Thus it is evident that the fact that appellant had availed the CENVAT Credit while claiming the benefit of exemption under Notification No 6/2005-ST as amended during the Financial Year 2007-2008 was well in knowledge of the department. No ST-3 return for the period 2007-08 has been produced during the entire proceedings. The fact that appellant was availing the CENVAT Credit against the documents which are for the Financial Year 2007-08 was disclosed to the concerned jurisdictional officers while filing the ST-3 return for the period April 2008-September 2008 - No ground for alleging suppression has been brought forth in the show cause notice or in the orders of lower authorities. The show cause notice alleging the suppression and invoking extended period of limitation for making demand for the period 2006-07 is bad in law. The bonafide belief of the appellant that this tax was not due from them is well founded in these correspondences. Further it is noted that the issue of renting of immovable property was in dispute and matter challenging constitutional validity of levy was taken before various high courts. Without going into the merits of admissibility of Exemption Notification 6/2005-ST, this appeal cannot be disposed of on this ground itself - As the demand is held barred by limitation, the penalty imposed on the appellant under Section 77 78 are also set aside. Appeal allowed.

Summary

Issues Involved:

1. Demand of service tax under Section 73(1) of the Finance Act, 1994.
2. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.
3. Admissibility of exemption under Notification No. 6/2005-ST.
4. Applicability of extended period of limitation.

Summary:

1. Demand of Service Tax:
The appellant, registered as a manufacturer and service provider, failed to register under "Renting of Immovable Property Services" and did not discharge service tax liability for the period from 01.06.2007 to November 2008. The authorities confirmed a demand of Rs. 1,27,357 under Section 73(1) of the Finance Act, 1994, along with applicable interest under Section 75.

2. Imposition of Penalties:
The authorities imposed penalties of Rs. 1,27,357 under Section 78 and Rs. 5000 under Section 77 of the Finance Act, 1994. The appellant argued that they were under a bona fide belief that no service tax was payable and had disclosed all details in their ST-3 returns. However, the authorities held that the non-payment was not under a bona fide belief, citing extensive correspondence from the department.

3. Admissibility of Exemption:
The appellant claimed exemption under Notification No. 6/2005-ST, arguing non-availment of CENVAT credit on input services. The authorities denied this exemption, noting that the appellant had availed CENVAT credit, which was reflected in their ST-3 returns. The exemption under Notification No. 6/2005-ST was not available as per its conditions if CENVAT credit was availed.

4. Applicability of Extended Period of Limitation:
The authorities invoked the extended period of limitation, alleging suppression of facts. However, the Tribunal found that the appellant had disclosed the CENVAT credit details in their ST-3 returns, and the department was aware of this. The Tribunal held that the demand for the period 2006-07 was barred by limitation, as no grounds for alleging suppression were provided in the show cause notice or orders.

Conclusion:
The Tribunal allowed the appeal, setting aside the demand and penalties, holding that the extended period of limitation was not applicable. The issue of admissibility of the exemption under Notification No. 6/2005-ST was not addressed on merits due to the limitation ruling.