2023 (1) TMI 689 - AT - Service Tax

Non/Short payment of service tax - renting of immovable property (office) in respect of rent charges paid to its Director - availment of wrong or higher abatement - penalty for late filing of ST-3 Returns - interest on delayed payment of service tax - penalty - revenue neutrality - Extended Period of Limitation. Demand of Rs. 2,90,628/- have been confirmed on payment of rent for office to Director of the Company during the period April 2014 to June 2017 - Reverse Charge Mechanism - Extended Period of Limitation - revenue neutrality - HELD THAT - Admittedly, under the facts, the appellant on payment of service tax on the rent was entitled to Cenvat Credit of the same. Thus, the situation is wholly revenue neutral - this ground is allowed and the demand is set aside. Allegation of short payment of service tax of Rs. 24,44,446/-, due to availment of wrong and higher abatement - HELD THAT - The appellant have done execution of new work after removing the existing structure and railing etc. This ground is allowed in favour of the appellant and set aside the demand of Rs. 24,44,446/-. Imposition of penalty under Section 77 for late filing of return and u/s 78 of FA - HELD THAT - The show cause notice have been issued by invocation of extended period of limitation. Further, prior to issue of show cause notice dated 13.07.2020 appellant have admittedly filed the service tax returns, about two years prior to it in the year 2018. In this view of the matter, the quantum of penalty is reduced to Rs. 2000 per return or a total penalty of Rs. 6000/- under Section 77 r/w Rule 7C of Service Tax Rules - penalty under Section 78 also stands set aside Demand of interest under Section 75 - It is contended that three challans deposited by the appellant for Rs. 2,241/- Rs. 44,008/- Rs. 5,539/- totalling Rs. 51,788/- have not been considered before computing the short payment of interest - HELD THAT - interest under Section 75 is payable for delayed payment of service tax, as such tax has not been paid by the due date or within the prescribed period. Thus, this ground is allowed by way of remand directing the Adjudicating Authority to recalculate the interest for delayed payment of tax after giving credit, on verification of the challans produced. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Service tax liability under reverse charge mechanism for renting of immovable property.
2. Allegation of short payment of service tax due to wrong or higher abatement.
3. Penalty for late filing of ST-3 Returns under Section 77.
4. Demand of interest under Section 75 for delayed payment of service tax.

Service tax liability under reverse charge mechanism for renting of immovable property:
The appellant, engaged in providing taxable services, was alleged to have not paid service tax under reverse charge mechanism for renting an office from its Director. The Deputy Commissioner confirmed the demand, imposing penalties under Section 78 and Section 77. The Commissioner (Appeals) upheld the decision. The appellant contended that the situation was revenue neutral as they were entitled to Cenvat Credit. The Tribunal allowed this ground, setting aside the demand.

Allegation of short payment of service tax due to wrong or higher abatement:
The appellant was accused of short payment of service tax due to availing wrong or higher abatement for repair and maintenance work. The appellant argued that they had actually done new construction work, justifying the abatement claimed. The Tribunal, after examining the scope of work and nature of activities, found in favor of the appellant, setting aside the demand.

Penalty for late filing of ST-3 Returns under Section 77:
Penalties were imposed for late filing of ST-3 Returns, with delays ranging from 440 to 693 days. The appellant claimed that the delays were due to adverse business situations and that returns were filed suo moto. The Tribunal noted that the show cause notice was issued after the returns were filed, reducing the penalty significantly to Rs. 2000 per return or a total of Rs. 6000.

Demand of interest under Section 75 for delayed payment of service tax:
Interest was demanded for delayed payment of service tax, with discrepancies in the consideration of deposited amounts. The appellant argued that certain deposited amounts were not credited, leading to erroneous calculations. The Tribunal directed a recalculation of interest after verifying the challans and allowed the appeal, setting aside the penalty under Section 78 as the demand was set aside on merits.

In conclusion, the Tribunal ruled in favor of the appellant on all grounds, setting aside the demands related to service tax liability, short payment, and penalties, while directing a recalculation of interest for delayed payment after considering the deposited amounts.