Tribunal revises service tax demand, sets aside penalty, upholds another penalty. Appellant's deduction arguments considered.

The Tribunal partly allowed the appeal by reducing the service tax demand, setting aside the penalty under section 76, and upholding the penalty under section 77(2). The appellant's arguments regarding the deduction for municipal taxes paid were considered, leading to a revised calculation of the service tax liability.

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Issues:
1. Service tax liability on renting of immovable property service.
2. Applicability of deduction for municipal taxes paid.
3. Imposition of penalties under sections 76 and 77 of the Finance Act, 1994.

Analysis:

Issue 1: Service tax liability on renting of immovable property service
The appellant, registered under 'Renting of Immovable Property Service,' acknowledged their liability to pay service tax. A show cause notice was issued for recovery of service tax amounting to Rs. 3,22,191. The appellant contended that they had already paid the service tax liability before receiving the notice, based on their calculation that included deduction for municipal taxes paid. The appellant argued that the lower authority's demand calculation did not consider the abatement for municipal taxes paid. The Tribunal examined the evidence and found that the appellant had indeed paid the service tax liability within 30 days of the show cause notice, as per Section 78B of the Finance Act, 1994. Consequently, the Tribunal set aside the penalty under section 76.

Issue 2: Applicability of deduction for municipal taxes paid
The appellant claimed deduction for municipal taxes paid while calculating the service tax liability, citing notification No. 29/2012-ST. The Tribunal reviewed the evidence and noted that the appellant had paid property tax of Rs. 7,79,734, with a portion adjusted against interest waived by the municipal authorities. Upon detailed examination, the Tribunal concluded that the demand needed adjustment, reducing it from Rs. 3,22,191 to Rs. 2,25,815. The Tribunal upheld the interest payment and appropriated the amount paid by the appellant towards it.

Issue 3: Imposition of penalties under sections 76 and 77
The appellant argued against the imposition of penalties under sections 76 and 77 of the Finance Act, 1994. The Tribunal found that the penalty under section 76 was not applicable since the appellant had paid the service tax liability before the issuance of the show cause notice. Therefore, the penalty under section 76 was set aside. However, the penalty under section 77(2) for failure to file service tax returns was upheld as the Tribunal did not find sufficient reason to invoke Section 80 to waive this penalty.

In conclusion, the Tribunal partly allowed the appeal by reducing the service tax demand, setting aside the penalty under section 76, and upholding the penalty under section 77(2). The appellant's arguments regarding the deduction for municipal taxes paid were considered, leading to a revised calculation of the service tax liability.

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