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2025 (3) TMI 508 - AT - Service TaxLevy of service tax on the renting of immovable property - taxable service or not - HELD THAT - The submissions in the appeal are that the renting of immovable property cannot be considered as a service and therefore no service tax could be levied by the Central Government - This argument cannot be accepted. Unless the levy of service tax on renting of immovable property service is held to be ultra vires by any constitutional court it will continue to be a valid levy. As a creation of the law this Tribunal has to follow the law and cannot go beyond its four corners. Further levy of service tax on renting of immovable property was upheld by five different High Courts. Conclusion - i) Unless the levy of service tax on renting of immovable property service is held to be ultra vires by any constitutional court it will continue to be a valid levy. ii) The levy of service tax on the renting of immovable property service by the appellant needs to be upheld. Consequently the appropriate amount of interest has to be paid. The Commissioner (Appeals) has already set aside the penalty under section 78 in the impugned order but upheld the penalty of Rs. 10, 000/- under section 77 of the Finance Act. The impugned order is upheld and the appeal is dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Liability to Pay Service Tax on Renting of Immovable Property Relevant Legal Framework and Precedents: The Finance Act, 1994, mandates the levy of service tax on certain services, including the renting of immovable property. Various High Courts, including the Bombay, Delhi, Punjab & Haryana, Orissa, and Allahabad High Courts, have upheld the constitutional validity of this levy. Court's Interpretation and Reasoning: The Tribunal noted that the renting of immovable property is a taxable service under the Finance Act. The argument that renting cannot be considered a service was rejected, as the levy is constitutionally valid unless declared otherwise by a competent court. Key Evidence and Findings: The appellant rented its property to commercial entities and did not dispute the provision of the service. The appellant's reliance on the Supreme Court's stay in the "Retailers Association of India" case was deemed inapplicable because the stay was specific to that case and did not universally apply to all similar cases. Application of Law to Facts: The Tribunal applied the established legal framework, reaffirming the liability of the appellant to pay service tax on the renting of immovable property, as upheld by multiple High Courts. Treatment of Competing Arguments: The appellant's argument that the service tax levy was not applicable was dismissed due to the lack of a constitutional court ruling that declared the levy ultra vires. The Tribunal emphasized its obligation to adhere to the existing legal framework. Conclusions: The Tribunal upheld the levy of service tax on the appellant for renting immovable property, confirming the correctness of the Commissioner (Appeals)'s decision. 2. Reliance on "Retailers Association of India" Case Relevant Legal Framework and Precedents: The appellant cited the "Retailers Association of India" case, where the Supreme Court stayed the recovery of service tax arrears. However, this stay was specific to the parties involved in that case. Court's Interpretation and Reasoning: The Tribunal clarified that the stay granted by the Supreme Court in the "Retailers Association of India" case does not automatically apply to other cases. Each case must be assessed on its own merits and circumstances. Key Evidence and Findings: The Tribunal found no evidence that the stay in the "Retailers Association of India" case extended to the appellant's situation. Application of Law to Facts: The Tribunal applied the principle that judicial stays are case-specific and do not create a blanket exemption for all similar cases. Treatment of Competing Arguments: The appellant's reliance on the "Retailers Association of India" case was rejected due to the absence of a direct legal connection or applicable precedent. Conclusions: The Tribunal concluded that the appellant could not benefit from the Supreme Court's stay in the "Retailers Association of India" case. 3. Imposition of Penalty under Section 77 of the Finance Act Relevant Legal Framework and Precedents: Section 77 of the Finance Act allows for the imposition of penalties for certain violations related to service tax compliance. Court's Interpretation and Reasoning: The Tribunal noted that the Commissioner (Appeals) had already set aside the penalty under section 78 but upheld a penalty of Rs. 10,000 under section 77. This decision was deemed appropriate and within the legal framework. Key Evidence and Findings: The Tribunal found that the appellant failed to comply with service tax obligations, justifying the imposition of a penalty under section 77. Application of Law to Facts: The Tribunal applied the provisions of section 77, affirming the penalty due to non-compliance with service tax regulations. Treatment of Competing Arguments: The appellant did not present any compelling arguments against the penalty under section 77, and the Tribunal found no reason to interfere with the Commissioner (Appeals)'s decision. Conclusions: The Tribunal upheld the penalty of Rs. 10,000 under section 77, confirming the correctness of the impugned order. SIGNIFICANT HOLDINGS Verbatim Quotes of Crucial Legal Reasoning: "Unless the levy of service tax on renting of immovable property service is held to be ultra vires by any constitutional court, it will continue to be a valid levy." Core Principles Established: The Tribunal reaffirmed the principle that service tax on renting of immovable property is valid and enforceable unless declared otherwise by a constitutional court. It also emphasized that judicial stays are case-specific and do not automatically extend to other cases. Final Determinations on Each Issue: The Tribunal upheld the levy of service tax on the appellant, rejected the applicability of the "Retailers Association of India" stay, and confirmed the penalty under section 77 of the Finance Act. The appeal was dismissed, and the impugned order was upheld.
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