2014 (7) TMI 628 - AT - Service Tax

Waiver of Penalty - renting of immovable property service - Penalty imposed u/s 77 & 78 - Held that - There was confusion in the minds of the general public whether service tax was payable on the activities of renting of immovable property Central Board of Excise and Customs finally came forward with a clarification, issued under its Circular No. 157/ 8/ 2012-ST dated 27.04.2012, that services provided by APMC for a separate charge (other than market fee ); to either the licensees or farmers or any other person e.g. renting of shops in the market area etc., would be liable to tax under the respective taxable heads. In view of the clarification dt. 27.04.2012 issued by CBEC that when this taxable service was introduced, there was a lot of confusion / litigation on its constitutional validity and the matter has not yet attained finality as the appeal is pending before the Hon ble Apex Court in the case of Home Solutions Retail (India) Ltd. 2011 (10) TMI 13 - Supreme Court of India - These circumstances constitute a reasonable cause on the part of the appellant for not paying service tax - Following decision of Euro Ceramics Ltd. Vs. Commissioner of Central Excise, Rajkot 2013 (5) TMI 538 - CESTAT AHMEDABAD , penalty set aside - Decided in favour of assessee.

Summary

Issues:
- Applicability of service tax on activities of Agriculture Produce Marketing Committees
- Confusion regarding service tax payment
- Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994

Analysis:
The case involved an appeal against an Order-in-Appeal passed by the Commissioner (Appeals-III), Central Excise Bhawan, Ahmedabad, regarding the imposition of service tax under the category of 'renting of immovable property service' on a statutory body, M/s. The Agriculture Produce Market Committee. The Directorate General of Central Excise Intelligence Ahmedabad discovered the tax liability, leading to the issuance of a show cause notice. The jurisdictional Assistant Commissioner confirmed the demand of service tax along with interest and imposed penalties under Sections 77 and 78. The Commissioner (Appeals) upheld the demand but set aside the penalties subject to certain conditions. The main issue was the imposition of penalties under Sections 77 and 78, which the appellant sought to set aside.

The appellant's representative argued that there was confusion regarding the payment of service tax on the activities of Agriculture Produce Marketing Committees until a clarification was issued by the Central Board of Excise and Customs. The appellant contended that due to the uncertainty and pending litigation on the constitutional validity of the tax, they should be eligible for penalty waiver under Section 80(1) of the Finance Act, 1994. Case laws were cited to support this argument. Additionally, it was highlighted that the appellant promptly paid the service tax and interest upon notification by the DGCEI, demonstrating no intent to evade payment, which, according to case laws, should exempt them from penalties.

On the contrary, the Revenue representative argued that the penalties were correctly imposed as the service tax and interest were not paid within the stipulated period under Section 80(2) of the Finance Act, 1994. After hearing both sides and reviewing the records, the judge noted the confusion in the public domain regarding the service tax on renting of immovable property activities. Referring to a clarification issued by the CBEC and pending litigation on the matter, the judge found a reasonable cause for the appellant's non-payment of service tax. Citing a previous tribunal case, the judge concluded that penalties under Section 78 seemed incorrect in the context of interpreting the law on service tax liability for renting immovable properties. Consequently, the penalties imposed under Sections 77 and 78 were set aside based on the provisions of Section 80(1) of the Finance Act, 1994.

In conclusion, the penalties imposed on the appellant under Sections 77 and 78 of the Finance Act, 1994 were set aside by the judge based on the reasonable cause for non-payment of service tax and the interpretation of the law regarding service tax liability on renting immovable properties. The appellant's appeal was allowed, and the penalties were revoked.