2022 (7) TMI 923 - AT - Service Tax

Tribunal rules in favor of appellant, setting aside service tax demands. Emphasizes revenue neutrality and property usage.

The tribunal ruled in favor of the appellant on all three issues, setting aside the demands for service tax and penalties. The judgment emphasized the ... Renting of immovable property service - reverse charge mechanism - residential premises used as residence - revenue neutrality - Cenvat credit - extended period of limitationRenting of immovable property service - revenue neutrality - Cenvat credit - extended period of limitation - Liability to pay service tax of Rs. 29,209/- on renting of immovable property service - HELD THAT: - The Tribunal records that the appellant was a registered service-tax assessee who regularly deposited service tax, maintained books of account and declared receipts subject to statutory audit. The shortfall asserted by Revenue arose from oversight in multiple transactions; there was no finding of suppression or contumacious conduct. As the appellant, a manufacturer, was entitled to Cenvat credit for service tax paid under reverse charge, the net position is revenue neutral. In these circumstances invocation of the extended period of limitation was held not to be available to Revenue and the demand was set aside. [Paras 6, 8]Demand of Rs. 29,209/- set aside as the case is revenue neutral and extended period of limitation cannot be invoked.Reverse charge mechanism - residential premises used as residence - extended period of limitation - Liability under RCM of Rs. 70,140/- on rent paid to Director for hiring of residential property used as the director's residence - HELD THAT: - The Tribunal accepted the admitted fact that the premises taken from the Director were residential premises and were used by the company as the director's residence. Service tax on renting of immovable property is not chargeable where premises are taken and used for residential purpose and not for commercial use. Consequently, the demand raised under reverse charge for rent paid to the Director was held to be wrongly raised and was set aside. [Paras 5, 8]Demand of Rs. 70,140/- under RCM set aside as service tax is not chargeable on the residential accommodation used as director's residence.Reverse charge mechanism - revenue neutrality - Cenvat credit - extended period of limitation - Whether service tax is payable under RCM on GTA service (and related RCM demand of Rs. 56,005/-) - HELD THAT: - The Tribunal dealt with the remaining RCM demands together with the admitted compliance record of the appellant. Given that the appellant was registered, had paid service tax (including by challan) and was entitled to Cenvat credit for tax paid under RCM, the net effect was revenue neutral. There being no suppression or contumacious conduct, the extended period of limitation could not be invoked to sustain the demand, and the Tribunal set aside the impugned demand and penalty. [Paras 4, 8]RCM demand in respect of GTA service treated as revenue neutral and set aside; extended period of limitation not invoked.Final Conclusion: The appeal is allowed: the demand of Rs. 70,140/- (rent to Director) is set aside as no service tax is chargeable on residential premises used as director's residence; the other RCM demands (including Rs. 29,209/- and the demand relating to GTA service) are set aside as the position is revenue neutral and the extended period of limitation is not invocable; penalty is also set aside. Issues Involved:1. Liability to pay service tax on renting of immovable property service2. Liability to pay service tax under Reverse Charge Mechanism (RCM) on rent paid to Director for hiring residential property3. Requirement to pay service tax under RCM on Goods Transport Agency (GTA) serviceAnalysis:1. The first issue pertains to the liability of the appellant to pay service tax amounting to Rs. 29,209/- on renting of immovable property service. The appellant, during the period of dispute from April 2015 to June 2017, was registered with the service tax department, maintained proper books of accounts, and filed periodical returns. The service tax in question was inadvertently not paid due to oversight, as the appellant had a history of regular compliance and audit scrutiny. The appellant, being a manufacturer, was entitled to Cenvat credit for the service tax paid, and the implementation of GST rendered the amount refundable. The tribunal found no element of suppression or contumacious conduct, leading to a conclusion of revenue neutrality. Consequently, the demand for service tax on this issue was set aside.2. The second issue revolves around the liability of the appellant to pay service tax under RCM amounting to Rs. 70,140/- on rent paid to the Director for hiring a residential property utilized as the director's residence. The appellant argued that since the premises were used for residential purposes and not for commercial activities, no service tax was chargeable. The tribunal agreed with this contention, highlighting that service tax is not applicable unless the premises are utilized for commercial purposes. Therefore, the demand for service tax under RCM in this scenario was deemed unjustified and was consequently set aside.3. The final issue concerns the requirement to pay service tax under RCM on GTA service. The tribunal did not delve into this issue explicitly in the judgment, indicating a lack of discussion or contention on this particular matter. However, it can be inferred that since there was no specific mention of any liability or demand related to GTA service in the final decision, the tribunal did not find any grounds to uphold such a demand. Therefore, the absence of discussion on this issue suggests that the tribunal did not find any merit in imposing service tax under RCM on GTA service.In conclusion, the tribunal ruled in favor of the appellant on all three issues, setting aside the demands for service tax and penalties. The judgment emphasized the concept of revenue neutrality in assessing the liability for service tax and highlighted the importance of considering the purpose of property usage in determining tax obligations.