2014 (12) TMI 1164 - AT - Service Tax

Appellant partially successful in appeal against Service Tax penalties.

LMJ SERVICE LTD. Versus COMMISSIONER OF C. EX. & S.T., JAIPUR-II

The appellant's appeal against the rejection of their appeal and confirmation of Service Tax amount was partially successful. Penalties under sections 76, ... Penalty u/s 76, 77 & 78 - Suppression of facts - Bonafide belief - Renting of immovable property - Management, maintenance or repair services - whether penal action is invited under Section 76 and Section 78 of the Finance Act, 1994 - Held that:- Appellants have deposited Service Tax on being pointed out by the department. Regarding payment of Service Tax on rendering service of renting of immovable property, they expressed that they had bona fide belief that tax was not payable as Hon’ble Delhi High Court [2009 (4) TMI 14 - DELHI HIGH COURT] has stayed the provisions. It was through retrospective amendment only, tax was made applicable - appellants has made case for waiver of penalty in respect of service of renting of immovable property. However relating to failure to deposit of Service Tax in respect of Management, maintenance or repair services, no justification has come forward as it came out that levy of Service Tax was there w.e.f. 2001. However neither tax was paid nor information relating to disclosure of the availment of the credit in excess was mentioned in returns. Hon’ble High Court of Rajasthan’s judgment [2012 (11) TMI 955 - RAJASTHAN HIGH COURT] squarely fits into the facts of present case of suppression which is willful. - Decided partly in favour of assessee. Issues involved:1. Appeal against the rejection of appeal and confirmation of Service Tax amount2. Liability related to renting of immovable property and repair and maintenance services3. Applicability of Service Tax under different services4. Imposition of penalties under various sections of the Finance Act, 19945. Failure to pay Service Tax on maintenance and repair services6. Justification for penalty waiver in certain cases7. Application of extended period for penal actionAnalysis:1. The appellant appealed against the rejection of their appeal and confirmation of Service Tax amount under section 73(1). Separate penalties were imposed under sections 76, 77, and 78 of the Finance Act, 1994. The appellant contended that they were under a bona fide belief regarding the non-leviability of the tax based on a Delhi High Court judgment.2. The appellant provided two types of services: renting of immovable property and repair and maintenance services. A significant amount was related to renting immovable property, and the rest was for repair and maintenance. The appellant argued that they believed no duty was leviable based on a Delhi High Court judgment. However, they had already deposited the Service Tax and interest for both services.3. The Department argued that the Service Tax was applicable to the impugned service charges income for maintenance and repair services. The appellant had failed to pay the tax for services rendered from 2005 to 2007. The Department contended that the appellant collected a substantial amount but did not pay the tax, reflecting an intent to evade.4. The Department emphasized the non-disclosure of income and failure to pay taxes, leading to the application of the extended period for penal action. The Department referred to a High Court decision that highlighted willful suppression and the need for penalty in cases of non-disclosure.5. The issue for consideration was whether penal action was warranted under sections 76 and 78 of the Finance Act, 1994. The appellant had paid the tax upon departmental notification but argued a bona fide belief regarding the tax on renting immovable property. However, for maintenance and repair services, the non-payment of tax from 2005-2007 lacked justification.6. The judgment concluded that penalties were not justified for the delay in paying Service Tax on renting immovable property due to interpretational issues. However, penalties imposed under other sections were upheld based on the willful suppression of facts and failure to disclose excess credit claims. The appellant was held liable for penal action due to the extended period and willful suppression.7. The final orders modified penalties based on the nature of the services and upheld the imposition of penalties where willful suppression was evident. The judgment was pronounced on 26-12-2014.