Religious body liable for service tax on property rentals from 01.07.2012, interest upheld.

The Tribunal found the appellant, a religious body, liable for service tax on renting immovable property only from 01.07.2012, when the negative list-based levy began. The extended period of limitation was deemed inapplicable due to a bona fide belief that the activity was not taxable pending a Supreme Court decision. Interest on the duty was upheld but limited to the normal period, and all penalties were set aside. The impugned order was partially modified, with the appeal allowed and consequential relief granted.

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Issues Involved:
1. Liability to Service Tax on Renting of Immovable Property by a Religious Body.
2. Applicability of Extended Period of Limitation.
3. Demand for Interest and Penalties.

Summary:

1. Liability to Service Tax on Renting of Immovable Property by a Religious Body:
The appellant, registered under the Societies Registration Act, 1860, argued that it is a religious body under the direct control of the Bishop of Tanjore, primarily engaged in religious, educational, and charitable activities. It claimed exemption from service tax on renting of immovable property up to 30.06.2012 under section 65(90a) of the Finance Act, 1994, which excludes renting by or to a religious body. The Tribunal examined the definition of a "religious body" and concluded that the Diocese is infused with the character of a religious body, as it engages in religious activities and is recognized as such in common parlance. The Tribunal referenced several judgments, including *The Commissioner Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt* and *Hindu Public v. Rajdhani Puja Samithee*, to support this conclusion. Consequently, the appellant was found liable for service tax only from 01.07.2012 when the negative list-based levy came into force.

2. Applicability of Extended Period of Limitation:
The appellant contended that the constitutional validity of the levy on renting of immovable property was under dispute and pending before the Supreme Court in *Union Of India vs UTV News Ltd.*, leading to a bona fide belief that the activity would not attract service tax liability. The Tribunal agreed, stating that the dispute was interpretational in nature, and hence, the invocation of the extended period was not justified.

3. Demand for Interest and Penalties:
The Tribunal noted that interest on the duty due arises automatically by operation of law, as per the Supreme Court judgment in *Commissioner of Central Excise, Pune Vs M/s SKF India*. However, the demand and interest were restricted to the normal period, and all penalties were set aside.

Conclusion:
The impugned order was partially modified, limiting the demand for duty and interest to the normal period and setting aside all penalties. The appeal was allowed with consequential relief as per law.

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