2017 (11) TMI 886 - AT - Service Tax

Renting of immovable property Service - sale of space or time for advertisement by municipalities / corporations - Held that - reliance placed in the case of Municipal Corporation Rajahmundry. Versus Commissioner of Service Tax & Central Excise-Visakhapatnam 2017 (7) TMI 685 - CESTAT HYDERABAD , where it was held that there cannot be any dispute on taxability on this score when the said activity is not being shown to be covered by any exclusion or exemption from service tax thereof. We therefore hold that this activity will definitely be leviable to service tax but only for the normal period of limitation. Further, it was held in the case that if the amounts received by the appellants are only towards advertisement tax collected by them under statutory powers bestowed on them, that activity cannot be brought under ambit of service tax and the taxable value thereof cannot be taxed as sale of space and time for advertising service. We dispose of the appeals filed by municipalities and municipal corporations by upholding the service tax liability with interest but setting aside the penalties imposed by the lower authorities. Penalties - Held that - since the penalties on similarly placed corporations/municipalities are set aside we find that the lower authorities were correct in not imposing any penalties/setting aside the penalties. Appeal allowed in part.

Issues Involved:
1. Service tax on renting of immovable property.
2. Service tax on sale of space or time for advertisement.
3. Applicability of extended period of limitation.
4. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Service Tax on Renting of Immovable Property:
The appellants conceded the tax liability for the normal period regarding renting of immovable property. The Tribunal held that this activity is definitely leviable to service tax for the normal period of limitation. The Tribunal noted that the appellants, being statutory bodies, cannot be held to have suppressed facts with any intent to evade payment of tax. Thus, demands of service tax beyond the normal period of limitation were set aside. The Tribunal referenced the decision in Birhanmumbai Municipal Corporation Vs. CST, Mumbai-I [2017-TIOL-1846-CESTAT-MUM], supporting that statutory bodies should not be accused of suppression or willful misstatement with intent to evade tax. Consequently, the Tribunal upheld the service tax liability for the normal period along with applicable interest but set aside the penalties for the same.

2. Service Tax on Sale of Space or Time for Advertisement:
The appellants argued that the revenues accrued from advertisement tax should not be taxed as service tax under the sale of space or time for advertisement service. They referenced the Gazette Notification and relevant sections of the Greater Hyderabad Municipal Corporation Act, 1955, and the Andhra Pradesh Municipalities Act, 1965, which authorize municipal taxation on advertisements. The Department contended that the income received was commercial consideration for the sale of space for advertisement and should fall within the ambit of service tax. The Tribunal observed that if the amounts received by the appellants were only towards advertisement tax collected under statutory powers, they cannot be taxed as service tax. However, if the amounts included consideration for the sale of space for advertisements, they would be liable for service tax. The matter was remanded to the original authority for de novo consideration to establish the nature and scope of the amounts received. If the amounts were found to be solely advertisement tax, there would be no service tax liability. If they included amounts for the sale of space for advertisements, they would be taxed, but only for the normal period of limitation, with no penal liabilities.

3. Applicability of Extended Period of Limitation:
The Department argued for the invocation of the extended period of limitation, citing that the appellants did not inform about the income under renting of immovable property despite communication from their Nodal Commissioner. The Tribunal, however, concluded that the appellants, being statutory bodies, did not suppress facts with any intent to evade tax. Hence, the extended period of limitation was not applicable, and demands beyond the normal period were set aside.

4. Imposition of Penalties:
The Tribunal set aside penalties imposed by the lower authorities for demands within the normal period, citing that statutory bodies cannot be accused of suppression or willful misstatement with intent to evade tax. For appeals filed by the Revenue against the non-imposition of penalties, the Tribunal upheld the lower authorities' decision not to impose penalties, finding no merits in the Revenue's appeals.

Conclusion:
The appeals were disposed of by upholding the service tax liability with interest but setting aside the penalties imposed by the lower authorities. The Tribunal dismissed the Revenue's appeals against the non-imposition of penalties, affirming the lower authorities' decisions. The judgment emphasized that statutory bodies should not be accused of suppression or willful misstatement with intent to evade tax, and any demands beyond the normal period of limitation were set aside.

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