Tribunal Overturns Penalty for Service Tax Non-Payment on Hotel Property Rental, Citing Precedent and Contentious Liability.

The Tribunal ruled in favor of the appellant, a five-star hotel, by setting aside the penalty imposed under Section 78 for non-payment of service tax on renting of immovable property. The Tribunal recognized the contentious nature of the tax liability and relied on precedents, such as R.K. Refreshment & Enterprises and Sree Kanyacombines, to justify waiving the penalty. Consequently, the appeal was allowed, providing the appellant with relief and consequential benefits.

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Issues:
Non-payment of service tax on renting of immovable property service, imposition of penalty under Section 78.

Analysis:
The appellant, a five-star hotel, was found to have not paid service tax on renting of immovable property service for a specific period. After being informed, the appellant paid the due amount along with interest. A show-cause notice was issued, confirming the demand of service tax, interest, and imposing a penalty under Section 78. The Adjudicating Authority confirmed the demand, interest, and penalty. On appeal, the Commissioner (appeals) upheld the decision, leading to the present appeal before the Tribunal.

The appellant's counsel argued that the payment was made promptly upon realizing the liability, citing a bona fide belief that there was no service tax liability until a relevant judgment. The counsel contended that since the entire amount along with interest was paid, there was no basis for the imposition of a penalty. The counsel relied on various Tribunal decisions to support the argument.

The Revenue's representative supported the impugned order during the hearing.

The Tribunal noted that the issue had been previously addressed in the case of R.K. Refreshment & Enterprises and Sree Kanyacombines, where penalties were waived due to the contentious nature of the service tax liability on renting of immovable property. Based on these precedents, the Tribunal set aside the penalty imposed in the impugned order and allowed the appeal filed by the appellant with consequential benefits.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed and providing relief based on the precedents and the circumstances of the case.

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