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ST – Building rented to earn revenue to perform statutory functions entrusted under Article 243W – no suppression can be alleged – penalty u/s 76 set aside: CESTAT

2019-TIOL-2527-CESTAT-MAD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, CHENNAI
COURT NO. I

Service Tax Appeal No. 40475 of 2019

Arising out of Order-in-Appeal No. 454 to 457/2018, Dated: 14.12.2018
Passed by the Commissioner of G.S.T. & Central Excise (Appeals), Coimbatore, Circuit Office, Madurai, 4, Lal Bahadur Shashtri Marg, C.R. Buildings, Madurai – 626102

WITH
(i) Service Tax Appeal No. 40476/2019 (The Commissioner, M/s. Sivakasi Municipality)
(ii) Service Tax Appeal No. 40477/2019 (The Commissioner, M/s. Sivakasi Municipality)
(iii) Service Tax Appeal No. 40478/2019 (The Commissioner, M/s. Sivakasi Municipality)

Arising out of Order-in-Appeal No. 454 to 457/2018, Dated: 14.12.2018
Passed by the Commissioner of G.S.T. & Central Excise (Appeals), Coimbatore, Circuit Office, Madurai, 4, Lal Bahadur Shashtri Marg, C.R. Buildings, Madurai – 626102

Date of Hearing: 09.05.2019
Date of Decision: 09.05.2019

M/s SIVAKASI MUNICIPALITY
NO. 30, POLICE STATION ROAD, SIVAKASI-626123

Vs

THE COMMISSIONER OF GST AND CENTRAL EXCISE
MADURAI COMMISSIONERATE, NO. 4, LAL BAHADUR SHASHTRI MARG
C R BUILDING, BIBIKULAM, MADURAI-626102

Appellant Rep by: Shri M Karthikeyan, Adv.
Respondent Rep by: Shri B Balamurugan, AR

CORAM: P Dinesha, Member (J)

ST – The assessee is challenging the penalties levied and confirmed under Sections 76 and 77 of FA, 1994 – The assessee is incharge of Municipal Administration and Water Distribution for the area covered under jurisdiction of said Municipality – The assessee is a local authority and hence, there can be no issue as to suppression of any facts and that too, with an intent to evade any tax – Though the activity of renting of building is not a statutory function, the building has been rented to earn revenue to perform the statutory functions entrusted on assessee under Article 243W of the Constitution of India – Further, the bona fide belief of assessee can be vouched from Circular 13052/2016/D2 clarifying the exemption available under Sl. No. 39 of Mega Exemption Notfn 25/2012-ST – Further, the taxability of Renting of Immovable Property Services has not attained finality and is still pending before the Larger Bench of Apex Court in the matters ofM/s. UTV News Ltd. 2018-TIOL-124-SC-ST and Mineral Area Development Authority & Ors. and therefore, it can be safely assumed that the doubts in mind of assessee as to taxability or otherwise of renting activity was in good faith, which is also due to the fact that there are contrary decisions available and that finally, it has reached the Supreme Court – It is clear with the fact that the main issue of taxability on Renting of Immovable Property itself being under litigation, the ingredients of Section 76 of FA, 1994 can be assumed to be absent, for levying penalty – Therefore, the penalty under Section 76 is set aside – However, the penalty under Section 77 ibid is imposed because of delay/failure in filing the ST-3 return, which is an admitted fact – Therefore, penalty imposed under Section 77 is upheld: CESTAT

Appeals partly allowed

Case laws cited:

Union of India Vs. M/s. UTV News Ltd – 2018-TIOL-124-SC-ST… Para 4.2

Mineral Area Development Authority & Ors. V/s. Steel Authority of India (2011) 4 S.C.C. 450… Para 4.2

FINAL ORDER NOS. 40807-40810/2019

Per: P Dinesha:

By this appeal, the assessee is challenging the penalties levied and confirmed under Sections 76 and 77 of the Finance Act, 1994.

2.1 Brief facts leading to this appeal that are relevant, are the appellant is in charge of the Municipal Administration and Water Distribution for the area covered under the jurisdiction of the said Municipality. The appellant had rented out their immovable properties such as lands and buildings in their possession and control to various persons on annual lease and monthly rental basis.

2.2 Various Show Cause Notices covering various periods namely April 2014 to September 2014, October 2014 to March 2015, April 2015 to March 2016 and April 2016 to March 2017 came to be issued proposing to demand Service Tax in respect of the rental charges collected, under Section 73 (1) of the Finance Act, 1994, along with interest and penalties. After due process of law, the Assistant Commissioner of G.S.T. and Central Excise, Sivakasi Division, vide Orders-in-Original Nos. 21 & 22/2018 dated 31.01.2018, 23/2018 dated 07.02.2018 and 24/2018 dated 08.02.2018 confirmed the service tax demands along with appropriate interest under Section 75 of the Finance Act, 1994, penalty under Section 76 of the Finance Act, 1994 apart from penalty of Rs. 5,000/- under Section 77 (2) of the Finance Act, 1994. Aggrieved by the orders of the lower adjudicating authority in so far as the imposition of penalties under Sections 76 and 77 of the Finance Act, 1994 are concerned, the appellant preferred an appeal before the Commissioner of G.S.T. and Central Excise (Appeals), Coimbatore, who vide common impugned Order-in-Appeal Nos. 454 to 457/2018 dated 14.12.2018 rejected the plea of the appellant, against which the present appeals are filed.

3. Today when the matter was taken up for hearing, Shri. M. Karthikeyan, Ld. Advocate, appeared on behalf of the assessee and Shri. B. Balamurugan, Ld. AR, appeared on behalf of the Revenue. I have heard the rival contentions and also gone through the orders relied on during the course of hearing. The only issue to be decided is whether the levy of penalty under Section 76 and 77 ibid was correct.

4.1 The undisputed facts are that the appellant is a local authority and hence, there can be no issue as to suppression of any facts and that too, with an intent to evade any tax. Further, I find that though the activity of renting of building is not a statutory function, the building has been rented to earn revenue to perform the statutory functions entrusted on the appellant under Article 243W of the Constitution of India. Further, the bona fide belief of the appellant can be vouched from the Circular No. 13052/2016/D2 dated 03.05.2017 issued by the Commissioner of Municipal Administration to all the Municipal Commissioners clarifying the exemption available under Sl. No. 39 of Mega Exemption Notification No. 25/2012-ST dated 20.06.2012..

4.2 Further, the taxability of Renting of Immovable Property Services has not attained finality and is still pending before the Larger Bench of the Hon’ble Apex Court, in the matters of Union of India Vs. M/s. UTV News Ltd. reported in 2018 (13) G.S.T.L. 3 (S.C.) = 2018-TIOL-124-SC-ST and Mineral Area Development Authority & Ors. V/s. Steel Authority of India reported in (2011) 4 S.C.C. 450 and therefore, it can be safely assumed that the doubts in the mind of the appellant as to taxability or otherwise of the renting activity was in good faith, which is also due to the fact that there are contrary decisions available and that finally, it has reached the Hon’ble Supreme Court.

5.1 In view of the above, it is clear with the fact that the main issue of taxability on the Renting of Immovable Property itself being under litigation, the ingredients of Section 76 of the Finance Act, 1994 can be assumed to be absent, for levying penalty. Therefore, the penalty under Section 76 is set aside.

5.2 However, the penalty under Section 77 ibid is imposed because of delay/failure in filing the ST-3 return, which is an admitted fact. Therefore, I do not propose to interfere with the penalty imposed under Section 77 ibid.

6. The appeals are accordingly partly allowed.

(Operative part of the order was pronounced in open court)

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