2013 (3) TMI 56 - AT - Service Tax

Service tax demand on rental immovable property - invoking extended period under proviso to Section 73 (1) of the Finance Act, 1994 - also interest on the service tax beside penalty u/s 76 as well as Section 78 - period of dispute is from 2007-2008 to 2008-2009 - Held that - Though service in relation to renting of immovable property had been brought within the service tax net w.e.f 1/6/07 by introducing Section 65 (105) (zzz) and as decided in Home Solution Retail India (2009 (4) TMI 14 - DELHI HIGH COURT) that mere renting of immovable property by itself cannot be regarded as service and would not attract service tax. It is only by retrospective amendment introduced w.e.f. 1/6/07 by Finance Act, 2010, that the renting of immovable property by itself became a taxable service neutralising the judgment of judgment of Hon ble Delhi High Court. In these circumstances the appellant cannot be accused of suppressing the relevant information from the department as during the period of dispute there was doubt about the levy of service on the renting of immovable property till the dispute was put to an end by retrospective amendment made by Finance Act, 2010. As decided in Continental Foundation Jt. Venture 2007 (2007 (8) TMI 11 - SUPREME COURT OF INDIA that when during the period of dispute there was doubt about interpretation of some provisions of law on account of conflicting judgments, which were later on resolved by a Larger Bench, the extended period under proviso to Section 11A (1) cannot be invoked - the penalty under Section 78 of the Finance Act, 1994 also would not be attracted, as the elements required for invoking longer limitation period under proviso to Section 73 (1) are the same as those required for imposing penalty under Section 78 of the Finance Act, 1994. Thus, the entire service tax demand is time barred - in favour of assessee.

Summary

Issues:
1. Validity of levy of service tax on renting of immovable property.
2. Applicability of extended period under proviso to Section 73 (1) of the Finance Act.
3. Imposition of penalty under Section 78 of the Finance Act.

Analysis:

Issue 1: Validity of levy of service tax on renting of immovable property
The appellant, a service provider registered for goods transport agency service, faced a demand for service tax on renting immovable property from 2007-2008 to 2008-2009. Initially, the Hon'ble Delhi High Court held that renting of immovable property alone cannot be considered a service. However, the Finance Act, 2010 retrospectively amended Section 65 (105) (zzz) to include renting of immovable property as a taxable service. The Commissioner (Appeals) reduced the demand considering the retrospective amendment. The Tribunal noted the ambiguity surrounding the levy during the dispute period and held that the appellant cannot be accused of suppressing information due to conflicting judgments. Citing relevant case law, the Tribunal ruled that the service tax demand was time-barred, setting aside the impugned order.

Issue 2: Applicability of extended period under proviso to Section 73 (1)
The Department invoked the extended period for demand of service tax, alleging suppression of facts by the appellant. However, the Tribunal found that the doubt regarding the taxability of renting immovable property until the retrospective amendment in 2010 precluded the invocation of the extended period. Referring to a relevant Supreme Court judgment, the Tribunal concluded that the longer limitation period under proviso to Section 73 (1) was not applicable in this case, rendering the entire service tax demand time-barred.

Issue 3: Imposition of penalty under Section 78
The Department imposed penalties under Section 76 and 78, alleging wilful misstatement or suppression of facts by the appellant. The Tribunal, considering the absence of deliberate suppression due to legal uncertainties, held that the elements required for invoking the longer limitation period under proviso to Section 73 (1) are akin to those for imposing penalties under Section 78. Consequently, the Tribunal ruled that the penalty under Section 78 was not warranted, as the service tax demand itself was time-barred. The impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal's judgment clarified the taxability of renting immovable property, the limitations on invoking extended periods, and the imposition of penalties under the Finance Act, 1994.