Service Tax Exemption and Penalties Clarified by Tribunal

The Tribunal held that no service tax was payable for rent received prior to 01.06.2007 for three properties. For a specific property, although rent was received in advance, service tax was paid when services were provided, making the demand unsustainable. Parts of certain properties rented out for residential purposes were not liable for service tax. The appellant was exempt from paying service tax from 01.04.2008 onwards due to property transfers. However, service tax was payable on properties rented for business purposes without prior payment. The Tribunal waived the penalty imposed on the appellant under Section 80 of the Finance Act, 1994.

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Issues involved:
Challenge of confirmation of demand of service tax on rent received under "Renting of Immovable Property Service".

Details of the judgment:

Issue 1: Service tax demand on rent received for three properties

The appellant challenged the confirmation of demand of service tax on rent received for three properties. The appellant had received advance payment of rent for various periods and the authorities alleged non-payment of service tax. The appellant argued that they had paid service tax while providing services and no differential tax or interest was payable. The Tribunal found that no service tax was payable for rent received prior to 01.06.2007 for all three properties. For the property at 25A, Shakespeare Sarani, although rent was received in advance, service tax was paid when services were provided, making the demand unsustainable.

Issue 2: Service tax liability for residential and business purposes

Regarding the properties at 106, Diamond Harbour Road, and 114/1A, Cotton Street, the Tribunal noted that parts of the premises were rented out for residential purposes, for which no service tax was payable under the category of "Renting of Immovable Property Service". The appellant was not liable to pay service tax from 01.04.2008 onwards as the properties were transferred to separate entities by a High Court order. However, any property rented out for business purposes, on which no service tax was paid, would be payable along with interest.

Issue 3: Penalty waiver under Section 80 of the Finance Act, 1994

Considering the circumstances and observations made, the Tribunal invoked Section 80 of the Finance Act, 1994, to waive the penalty imposed on the appellant. The appeal was disposed of with these observations.

Separate Judgment:
No separate judgment was delivered by the Judges in this case.

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