2024 (10) TMI 327 - AT - Service Tax

Non-payment of service tax - Renting of Immovable Property Services - Applicability of service tax for the pre and post negative list period. Demand prior to 30.06.2012 (pre-negative list period) - HELD THAT - For the pre-negative period, this issue stands decided in the case of COMMISSIONER OF CENTRAL EXCISE, NASIK VERSUS DEORAM VISHRAMBHAI PATEL 2015 (9) TMI 790 - CESTAT MUMBAI , the Tribunal held 'It can be seen from the above reproduced findings of the first appellate authority, the conclusion arrived at is very correct, as co-owners of the property cannot be considered as liable for a Service Tax jointly or severally as Revenue has taken to identify the service provider and the service recipient for imposing service tax liability, which in this case, we find our individual. The conclusion arrived at by the first appellate authority is correct and he has confirmed the demand raised on the respondents by extending the benefit of Notification No. 6/2005-S.T. We do not find any reason to interfere in such a detailed order.' - the demand prior to 30.06.2012 does not sustain. Demand for the period post 01.07.2012 (post-negative list period) - HELD THAT - The Department has not submitted any evidence to the contrary. In the Finance Act, 1994, Section 65B(51) defines taxable services as any service on which service tax is leviable under Section 66B . Section 66B of the Finance Act, 1994 provides that there shall be levied a tax on all services except those mentioned in negative list (Negative list has been defined under Section 65B(34) as services listed in Section 66D of Finance Act, 1994) and provided or agreed to be provided by one person to another in the taxable territory and collected in the manner prescribed. In the instant case, it is noted that post 01.07.2012, the firm was not functional, and the rental agreements are in the name of the individual partner, with regard to the property held by them jointly. So, there cannot be a case of service to oneself. Hence, they are not liable to service tax - The decision in the case of the CADILA HEALTHCARE LIMITED VERSUS C.S.T. -SERVICE TAX - AHMEDABAD 2021 (4) TMI 1157 - CESTAT AHMEDABAD relied upon by the Ld AR deals with the remuneration received by the Director of the firm for providing other independent services, which is not the case of the appellant. The impugned order is liable to be set aside and is set aside. Consequently, the appeal is allowed.

Summary

Issues Involved:

1. Liability of service tax on the appellant firm for the pre-negative list period.
2. Applicability of service tax for the post-negative list period.
3. Invocation of extended period and imposition of penalties.

Issue-wise Detailed Analysis:

1. Liability of Service Tax on the Appellant Firm for the Pre-Negative List Period:

The primary issue was whether the appellant firm was liable to pay service tax for the pre-negative list period. The appellant argued that the property was owned and rented out by the partners individually, not by the firm. The Tribunal found that for the pre-negative list period, the issue was already settled in the case of Commissioner of Central Excise, Nasik vs. Deoram Vishrambhai Patel, where it was held that co-owners should not be clubbed for the purpose of service tax liability. The Tribunal concluded that the appellant firm was not liable for service tax during this period as the rental income was below the exemption limit when considered individually for each partner. Hence, the demand for service tax for the pre-negative list period was not sustainable.

2. Applicability of Service Tax for the Post-Negative List Period:

For the period post 01.07.2012, the term "Person" was defined under Section 65B(37) of the Finance Act, 1994, which included a firm. The Department argued that the firm was liable for service tax on the services provided. However, the Tribunal noted that the firm was not operational post-2009-10, and the rental agreements were in the names of individual partners. Therefore, there was no service provided by the firm to itself, negating the service tax liability. The Tribunal found that the Department did not provide evidence to counter the appellant's claim that the firm was non-functional. Thus, the Tribunal held that the appellant was not liable for service tax for the post-negative list period.

3. Invocation of Extended Period and Imposition of Penalties:

The Department had invoked the extended period for demand and imposed penalties under Sections 77 and 78 of the Finance Act, 1994. The Tribunal, relying on the earlier decision in the case of Deoram Vishrambhai Patel, observed that the appellant had paid service tax for the years 2009-10 and 2010-11 on their own initiative, without any suppression of facts or intention to evade tax. The Tribunal held that the issuance of a show cause notice and imposition of penalties was not justified, as the appellant's case was covered under Section 73(3) of the Finance Act, 1994, which provides for no penalty if the tax is paid with interest before the issuance of a notice.

Conclusion:

In conclusion, the Tribunal set aside the impugned order, holding that the appellant was not liable for service tax for both the pre-negative and post-negative list periods. The appeal was allowed, and the penalties imposed were annulled. The decision emphasized the individual ownership of the property and the non-operational status of the firm during the relevant periods.