2016 (8) TMI 549 - HC - Service Tax

Mandap keeper services - Short-payment of service tax bonafide belief - extended period of limitation - Section 73(a) of the Finance Act Held that - Tribunal has not rendered any findings so far as the appellant had not paid the service tax on the amounts disputed and he was under the bona fide impression that the halls were not fallen under the levy of service tax where certain kind of activities were to be held and therefore also it cannot be said that the appellant has deliberately evaded the service tax. The information was sought for under Section 71 of the Act and if such information was not supplied then the case would fall under Section 73(a), but the demand was called for in the year 2001 and on the basis of the information supplied, showcause notice came to be issued and thus the case of the assessee would not fall under Section 73(a) and it would fall under Section 73(b) of the Act. The tribunal has committed serious error by not considering the submissions made by the appellant. Appeal disposed off decided in favor of appellant.

Issues:
Challenge to final order passed by Customs, Excise & Service Tax Appellate Tribunal, New Delhi | Liability to pay service tax on services provided by a local authority | Interpretation of Sections 65(67), 73, and 71 of the Finance Act, 1994 | Application of extended period of limitation | Bona fide belief of the appellant regarding service tax liability | Justification of penalty imposition | Correctness of the Tribunal's order

Analysis:

1. Challenge to Final Order:
The appellant, a local authority under the Bombay Provincial Municipal Corporation Act, challenged the final order passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. The Tribunal confirmed the demand for service tax but set aside the penalty, leading to the current appeal before the High Court.

2. Liability to Pay Service Tax:
The case revolved around the liability of the appellant to pay service tax on services provided as a mandap keeper. The appellant contended that it had been maintaining various halls and stadiums for public purposes, supplying Mandaps for public functions. The Central Government brought such services under the service tax net, and the appellant had been filing returns and paying service tax accordingly.

3. Interpretation of Relevant Sections:
The appellant argued that the demand for service tax for the period from July 1997 to March 2002, invoking the extended period of limitation, was not legally sustainable. Sections 65(67), 73, and 71 of the Finance Act, 1994 were crucial in determining the applicability of service tax and the obligations of the appellant.

4. Bona Fide Belief and Penalty Imposition:
The appellant maintained a bona fide belief that there was no liability to pay service tax on certain activities conducted in the halls and stadiums. The Tribunal's decision on penalty imposition was a key point of contention, with the appellant arguing that being a statutory government body, the penalty was not justified.

5. Correctness of Tribunal's Order:
The High Court analyzed the submissions made by both parties and found that the Tribunal had not adequately considered the appellant's arguments. The Court concluded that the demand for service tax fell under Section 73(b) of the Act, not Section 73(a, and allowed the appeal in favor of the appellant.

6. Final Decision:
The High Court allowed the appeal, answering the question raised in favor of the appellant and against the department. The Court highlighted errors in the typographical references in the judgment and corrected them for accuracy.

This detailed analysis of the judgment showcases the legal intricacies involved in determining the liability of a local authority to pay service tax, the application of relevant sections of the Finance Act, and the significance of a bona fide belief in tax obligations.

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