2023 (6) TMI 590 - AT - Service Tax

Waiver of penalty u/s 76, 77 and 78 of FA - invocation of sub-section (1) of section 80 of the Finance Act - leviability of service tax under the category of renting of immovable property service, under confusion during the initial period - case of Revenue is that respondent in this case did not pay the service tax for the period in question till the appeal was filed and are not eligible for the waiver of penalty as provided under sub-section (2) of section 80 of the Finance Act, 1994. HELD THAT - In the present case, it cannot be disputed that there was confusion with regard to the levy and liability to pay the service tax under the category renting of immovable property service . There were several litigations pending before various forums. The amendment brought forth in section 65(105)(zzzz) vide Finance Act, 2010 made the provisions applicable retrospectively. Later, the Government also introduced sub-section (2) of section 80 granting time for the assessees to pay up the liability along with interest. However, sub-section (2) of section 80 does not bar the application of sub-section (1) of section 80. The Commissioner has recorded that there was confusion during the relevant time and the respondent was under bonafide belief that there was no liability to pay service tax. It is also noted by the Commissioner that being a statutory authority, under the Government, there cannot be any malafide intention to evade payment of service tax. It was thus held that there exists reasonable cause on the part of the respondent for the failure in discharging the service tax liability. There are no ground to take a different view as there was indeed confusions and litigations with regard to the payment of service tax on renting of immovable property service. In the case of ETA ENGINEERING LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI 2004 (10) TMI 1 - CESTAT, NEW DELHI , the Tribunal observed that the appellants being under bonafide doubt whether their activity was taxable or not, there existed a reasonable cause for non-payment of tax. The penalties were set aside in terms of sec. 80 of the Act. It was held that of Section 80 has an overriding effect over other sections. In the present case, there is nothing brought out by evidence that the respondent, Municipality had not paid the service tax with deliberate intention to evade tax. Instead there was confusion going on as to the levy of tax itself. In Kerala Cooperative Deposit Guarantee Fund Board Vs. CCE, Thiruvanthapuram 2020 (2) TMI 569 - CESTAT BANGALORE , the Tribunal set aside the penalty observing that mens rea cannot be attributed to a body constituted under statute. There are no reasons to interfere with the impugned order. The same is sustained. The appeal filed by Revenue is dismissed.

Summary

Issues involved:
The judgment involves the issue of whether penalties proposed under sections 76, 77, and 78 in the Show Cause Notice should be imposed on the respondent for not paying service tax under the category of 'Renting of Immovable Property Service' for the period from 1.6.2007 to 31.12.2011.

Details of the Judgment:

Issue 1: Penalties under Section 80 of the Finance Act
The respondent was issued a Show Cause Notice proposing to demand service tax for the mentioned period. The adjudicating authority confirmed the demand but did not impose any penalty under section 80 of the Finance Act, 1994. The department appealed this decision, arguing that the respondent did not pay the service tax before the appeal was filed, making them ineligible for penalty waiver under sub-section (2) of section 80.

Issue 2: Confusion regarding Taxability
The confusion regarding the taxability of 'Renting of Immovable Property Service' during the initial period of its introduction in 2007 was highlighted. The Government retrospectively amended the relevant section in 2010, clarifying the tax liability. The respondent, being a government body, argued that there was no motive for non-payment of service tax. The learned AR contended that the confusion no longer existed after the amendment and the respondent should have paid the service tax.

Issue 3: Application of Section 80 for Penalty Waiver
The adjudicating authority waived the penalties under section 80(1) citing genuine confusion during the relevant time. The Commissioner noted that the respondent, a statutory authority under the Government, had a reasonable cause for not discharging the service tax liability. Precedents were cited to support the argument that penalties should be waived when there is a bonafide doubt or confusion regarding tax liability.

Issue 4: Tribunal's Decision
The Tribunal upheld the impugned order, stating that there were genuine confusions and litigations surrounding the payment of service tax on renting of immovable property service. Precedents were cited where penalties were set aside due to bonafide doubts or confusion regarding tax liability. The Tribunal found no evidence of deliberate intention to evade tax by the respondent, concluding that the penalties should be waived under section 80 of the Finance Act.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision to waive penalties under section 80 of the Finance Act for the respondent in this case.