2017 (3) TMI 182 - AT - Service Tax

Waiver of penalty imposed u/s 70, 76, 77, 78 of FA, 1994 - renting of immovable property - taxability was under dispute under various litigation on various forum - Section 80(1) - Held that - Section 80(1) is general provision for waiver of penalty if the appellant is able to show reasonable cause for non payment of service tax in time - issue was not free from doubt and it involves grave interpretation of law, in such a situation it was sufficient cause for non payment of service tax - appellant is entitle for waiver of penalties in terms of Section 80 (1) of the FA - penalties waived - appeal allowed - decided in favor of appellants.

Summary

Issues:
Waiver of penalties under Sections 70, 76, 77, and 78 of the Finance Act, 1994 related to the demand of service tax on renting of immovable property.

Analysis:

1. Issue of Waiver of Penalties:
The appellant filed appeals seeking the waiver of penalties imposed under various sections of the Finance Act, 1994, concerning the demand of service tax on renting immovable property. The appellant had paid the service tax, which was not in dispute. The appellant argued that the taxability of renting immovable property was under dispute and had been subject to various litigations. The appellant referred to Section 80(2), which provides for penalty waiver if service tax is paid within six months of the Finance Bill, 2010 enactment. The appellant attempted to pay the tax within the specified time frame but faced a one-day delay due to a bank discrepancy. Despite not qualifying for immunity under Section 80(2), the appellant claimed that their case fell under Section 80(1) due to the bonafide intention and the complex nature of the taxability issue. The appellant cited various judgments to support their argument.

2. Arguments by Appellant and Revenue:
The appellant's counsel contended that the penalties should be waived under Section 80(1) considering the genuine intention and the uncertainty surrounding the taxability issue. On the other hand, the Revenue representative reiterated the impugned order's findings, emphasizing that the appellant's delay in paying the service tax beyond the prescribed time limit under Section 80(1) rendered them ineligible for immunity under Section 80(2).

3. Judgment and Reasoning:
After considering both parties' submissions, the Member(Judicial) observed that the appellant's delay in meeting the service tax payment deadline made them ineligible for immunity under Section 80(1). However, Section 80(1) allows for penalty waiver if a reasonable cause for non-payment of service tax on time is demonstrated. Given the complexity and uncertainty surrounding the taxability issue of renting immovable property, especially since it was resolved by the Supreme Court in a previous case, the Member deemed it a sufficient cause for the appellant's delayed payment. Consequently, the penalties imposed under Sections 76, 77, and 78 of the Finance Act were waived, leading to the setting aside of the consequent penalty under Section 70. The impugned order was overturned, and the appeals were allowed.

This comprehensive analysis delves into the issues of penalty waiver, the arguments presented by both parties, and the detailed reasoning behind the judgment provided by the Appellate Tribunal CESTAT CHENNAI.