Tribunal grants refund for penalty and service tax on renting property

The Tribunal granted the appellant's refund claim for the penalty component and service tax on renting immovable property. The Tribunal held that the penalty amount should be refunded as it was collected without legal authority. Additionally, the time limit for refund was determined based on the exemption notification, not Section 11B. The Tribunal set aside the impugned order, allowing the appeal and directing the Assistant Commissioner to sanction the refund within three months if otherwise in order.

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Issues:
1. Refund claim rejection including penalty component.
2. Refund rejection for service tax on renting of immovable property.

Analysis:

Issue 1: Refund claim rejection including penalty component
The appellant filed an appeal against the Order-in-Appeal upholding the rejection of their refund claim, which included a penalty component. The appellant, a private museum, had paid service tax, interest, and penalty for levying entry fees and renting out museum property. Subsequently, an exemption notification was issued, exempting service tax on entry fees retrospectively. The appellant filed a refund claim, which was partially rejected, excluding the penalty component. The appellant argued that since service tax and interest were exempted, penalty should also be refunded. The Tribunal agreed, stating that if service tax and interest were exempted, there should be no penalty. The Tribunal held that the penalty amount paid by the appellant should be refunded as it was collected without legal authority, not falling under the prescribed time limit of Section 11B.

Issue 2: Refund rejection for service tax on renting of immovable property
The second issue pertained to the rejection of the refund claim for service tax on renting immovable property. The appellant contended that the exemption notification dated 28.2.2017 should be considered for calculating the time limit for refund, not Section 11B. The Tribunal agreed, stating that the time limit should be reckoned under Section 11C(2) from the date of the notification. As the appellant fell within the threshold limit of exemption, the duty of service tax on renting immovable property was deemed without legal authority. Therefore, the Tribunal set aside the impugned order, allowing the appeal and directing the Assistant Commissioner to sanction the refund within three months from the date of the order, if otherwise in order.

In conclusion, the Tribunal granted the appellant's refund claim for the penalty component and service tax on renting immovable property, emphasizing that the exemption notification should be considered for calculating the time limit for refund claims.

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