ST - Renting of Immovable property - Tax paid with interest after due date - while clarifying VCES, 2013, Govt has left a window open for taking lenient view in matter of penalty - as issue was in dispute, penalty u/s 76 waived: CESTAT
By TIOL News Service
MUMBAI, JAN 23, 2015: THE appellant had rented out their premises to M/s Loot India Pvt. Ltd. Renting of immovable property was brought under the Service Tax net under Section 65(105)(zzzz) w.e.f. 1.6.2007. The levy was challenged by M/s Retailers Association of India and the matter travelled to the Supreme Court.
Vide its order dated 14.10.2011 - 2011-TIOL-104-SC-ST, the apex Court inter alia ordered thus -
| (i) all members of the appellant association, namely, Retailers Association of India, who are before us, shall deposit with the concerned department 50% of the arrears towards the said tax within six months in three equated instalments, on or before 1st November, 2011; 1st January 2012 and 1st March, 2012; |
| (ii) for the balance 50% all the members shall furnish a solvent surety to the satisfaction of the jurisdictional Commissioner; |
In the present case, the recipient of service being a party to the Association of Retailer's Association of India did not fulfil the condition laid down by the Supreme Court. The service provider in this case did not challenge the levy and was not a party in the case before the Supreme Court.
However, the appellant paid the Service Tax on 10.12.2012 with interest and also filed the Service Tax returns.
The question involved in the present case is imposition of penalty u/s 76 of the FA, 1994.
As the Commissioner(A) upheld the penalty, the appellant is before the CESTAT.
It is submitted that since the issue was in dispute upto the level of Supreme Court and the matter of levy of Service Tax on renting of immovable property has still not attained finality, there is reasonable cause for invoking Section 80 of the Finance Act, 1994 and waiving the penalty under Section 76. Reliance is placed on the decisions in The Agricultural Produce Market Committee vs. Commissioner or Central Excise, Ahmedabad-III - 2014-TIOL-1242-CESTAT-AHMD and Commissioner of Service Tax, Bangalore vs. Motor World - 2012-TIOL-418-HC-KAR-ST to justify their claim. It is also pleaded that they were entitled to waiver of penalty under VCES introduced in2013 and in this regard the decision in Vinayaka Securities and Detective Agency vs. Commissioner of Central Excise - 2014-TIOL-1242-HC-KAR-ST is cited.
The AR adverted to the provisions of Section 80(2) of FA, 1994 in terms of which,in the matter of Renting of Immovable property, penalty under Section 76 was waived subject to the condition that the amount of Service Tax along with interest is paid in full within a period of six months on which the Finance Bill was passed i.e. before 26.11.2012. Inasmuch as since the tax has been paid only on 10.12.2012 the benefit is not available, submitted the AR.
The said provision 80(2) reads -
| (2) Notwithstanding anything contained in the provisions of section 76 or section 77 or section 78, no penalty shall be imposable for failure to pay service tax payable, as on the 6th day of March, 2012, on the taxable service referred to in sub-clause (zzzz) of clause (105) of section 65, subject to the condition that the amount of service tax along with interest is paid in full within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President. |
The Bench inter alia observed -
++ As the recipient in this case did not observe conditions of the stay, the interim order of the Hon'ble Supreme Court does not help the appellant who is the service provider in this case. Further, Government gave the benefit of waiver of penalty under Section 76 if the tax was deposited before 26.11.2012 under Section 80(2) of the Finance Act, 1994. The appellant paid the Service Tax on 10.12.2012 i.e after two weeks from the expiry of the period specified under Section 80(2). Clearly the waiver of penalty cannot be extended to the appellant in view of Section 80(2) because the Government had given enough opportunity to the appellant to deposit the tax before the date specified under Section 80(2).
Nonetheless, in the matter of the claim made by the appellant that they are entitled for the waiver of penalty in view of the Voluntary Compliance Encouragement Scheme, 2013, the Bench referred to Circular No.174/9/2013-ST dated 25.11.2013 wherein it is clarified thus -
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Whether declaration can be made in such case where service tax pertaining to the period covered by the Scheme along with interest has already been paid by the parties, before the Scheme came into effect, so as to get waiver from penalty and other proceedings?
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As no "tax dues" is pending in such case, declaration cannot be filed under VCES. However, there may be a case for taking a lenient view on the issue of penalties under the provision of the Finance Act, 1994. In this regard attention is invited to section 73 (3) and section 80 of the Finance Act, 1994.
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Thereafter, the CESTAT observed -
"…From the above, it is clear that normally the scheme is not applicable when the tax had already been paid before the introduction of the scheme. At the same time, Government has left a window open for taking a lenient view in some circumstances under Section 80 of the Finance Act, 1994. As discussed above, the matter was pending in Courts and has still not attained finality in the case of Retailers Association of India, which is pending in the Hon'ble Supreme Court. Reliance is also placed by the learned Counsel on the Hon'ble Karnataka High Court's judgment in the case of M/s. Vinayaka Securities (supra) to justify that as the entire tax and interest had already been paid, benefit of scheme should be given. In view of the Circular and High Court's judgment, I hold that the appellant deserves a lenient view in the matter."
Holding as above, the Bench waived the penalty u/s 76 of the FA, 1994 and by setting aside the o-in-a allowed the appeal with consequential benefit.
In passing: Another battle royale begins…
(See 2015-TIOL-178-CESTAT-MUM)
