2018 (7) TMI 1440 - AT - Service Tax

Renting of immovable property Service - appellant has rented their premises for use of Axis Bank and were receiving rent for the same - benefit of N/N. 6/2005 dated 01.03.2005 as amended - Held that - This Notification exempts the payments of Service Tax in respect of taxable service upto the initial aggregate value of ₹ 8 Lakhs (for the period 2007-08) - Since the renting became taxable service only w.e.f. 01.06.2007, the rent received by the appellant in the year 2006-07 cannot be considered as receipt of consideration for taxable service - even if such amount received is more than ₹ 4.00 Lakhs / 8.00 Lakhs in 2006-07, the benefit of N/N. 6/2005 for the period 2007-08 cannot be denied to the appellant. Penalty - Held that - The service of renting of immovable property was introduced w.e.f. 01.06.2007 and the demand for service tax is for the period immediately after the introduction of such service - penalty waived by invoking section 80. The demand for Service Tax is restricted to the amount already paid by the appellant alongwith interest - penalty set aside - Appeal allowed in part.

Issues:
1. Applicability of threshold exemption under Notification No.6/2005 for renting of immovable property.
2. Denial of benefit of threshold exemption by the Department.
3. Liability for payment of Service Tax on rent received.
4. Dispute regarding penalty imposition.

Analysis:

Issue 1: Applicability of threshold exemption under Notification No.6/2005 for renting of immovable property
The appellant claimed exemption under Notification No.6/2005 for the rent received from Axis Bank. The Notification exempts Service Tax payments up to a certain value, subject to conditions. The Tribunal noted that renting of immovable property became a taxable service from 01.06.2007. The appellant argued that rent received in 2006-07 should not be considered as consideration for taxable service since the service became taxable only from June 2007. The Tribunal agreed and held that the benefit of the exemption cannot be denied based on 2006-07 rent receipts.

Issue 2: Denial of benefit of threshold exemption by the Department
The Department denied the appellant the benefit of the threshold exemption under Notification No.6/2005, claiming that the appellant received consideration for taxable service exceeding the threshold in the previous financial year. However, the Tribunal ruled in favor of the appellant, stating that rent received in 2006-07 should not affect the exemption claim for 2007-08, as the taxable service of renting commenced only from June 2007.

Issue 3: Liability for payment of Service Tax on rent received
The appellant had paid the Service Tax amount along with interest, except for disputing the penalty. The Tribunal acknowledged the payment made by the appellant and upheld the same, as it was not in dispute. The liability for Service Tax on rent received by the appellant from Axis Bank was a subject of dispute, which was resolved in favor of the appellant based on the Notification provisions.

Issue 4: Dispute regarding penalty imposition
The Tribunal considered the introduction of the service of renting of immovable property from June 2007 and the demand for Service Tax immediately after its introduction. Consequently, the Tribunal decided in favor of the appellant, waiving the penalty under Section 80 of the Act. The penalty imposed under various sections was waived, and the demand for Service Tax was restricted to the amount already paid by the appellant along with interest.

In conclusion, the Tribunal allowed the appeal partly, granting the benefit of the threshold exemption, upholding the Service Tax payment with interest, and waiving the penalty imposed, considering the circumstances surrounding the introduction of the taxable service of renting of immovable property.

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