Tribunal upholds service tax demand for renting property service under Finance Act, 1994

The Tribunal upheld the adjudication order confirming a service tax demand for renting of immovable property service, citing the constitutional validity of Section 65(105)(zzzz) of the Finance Act, 1994. It clarified that the liability to remit service tax rests with the service provider, and the obligation to predeposit the assessed service tax, interest, and penalty under Section 35F of the Central Excise Act, 1944, was not waived due to the legally sound nature of the adjudication order. The petitioner was directed to remit the liability within a specified timeframe, with non-compliance resulting in appeal rejection.

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Issues:
1. Application for waiver of pre-deposit and stay for further proceedings.
2. Constitutional validity of Section 65(105)(zzzz) of the Finance Act, 1994.
3. Liability of service provider for remitting service tax on renting of immovable property.
4. Obligation to predeposit the assessed service tax, interest, and penalty under Section 35F of the Central Excise Act, 1944.

Issue 1: Application for waiver of pre-deposit and stay for further proceedings
The appellant filed an appeal against an adjudication order confirming a service tax demand for renting of immovable property service. The application sought waiver of pre-deposit and stay for further proceedings. The Tribunal analyzed the request in light of the statutory provisions and the declared law regarding the liability of the appellant.

Issue 2: Constitutional validity of Section 65(105)(zzzz) of the Finance Act, 1994
The Tribunal referred to a judgment by the full Bench of the Delhi High Court which concluded the issue of constitutional validity of Section 65(105)(zzzz). The Court overruled its earlier decision and upheld the retrospective operation of the relevant statutory provision. Similar views were taken by other High Courts, confirming the scope of Section 65(105)(zzzz). Consequently, the adjudication order in the present case was deemed impeccable.

Issue 3: Liability of service provider for remitting service tax on renting of immovable property
The Tribunal noted that the liability to remit service tax on renting of immovable property rests with the service provider and not the recipient. Even if the recipient had not reimbursed the service tax component due to pending litigation, the statutory liability of the service provider remained intact.

Issue 4: Obligation to predeposit the assessed service tax, interest, and penalty under Section 35F of the Central Excise Act, 1944
In assessing whether the obligation to predeposit the service tax liability should be waived, the Tribunal considered the current legal framework and the retrospectively amended provisions of Section 65(105)(zzzz). As the adjudication order was found to be legally sound, the Tribunal concluded that there was no justification for waiving the pre-deposit requirement. The Tribunal emphasized that its discretion was based on the law and not subjective considerations.

In conclusion, the Tribunal directed the petitioner to remit the adjudicated liability within a specified timeframe, failing which the appeal would be rejected for non-compliance. The application for waiver and stay was disposed of accordingly.

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