Tribunal dismisses Revenue's appeal on penalties for Service Tax, upholds High Court judgment

The Tribunal dismissed the Revenue's appeal regarding the non-levy of penalties under Sections 76, 77, and 78 of the Act related to Service Tax on renting of immovable property service. The Tribunal upheld the decision to drop the proposed penalties, citing a judgment of the High Court which set aside penalties for municipal corporations in similar cases, emphasizing that no Government body could be imputed with the intent to commit fraud. The Tribunal found no merit in the appeal and concluded that the issue was solely about penalties, as the chargeability to Service Tax by the Municipal Corporation had been settled by the High Court.

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Issues involved:
The issues involved in this case are the non-levy of penalties under Sections 76, 77, and 78 of the Act, related to Service Tax on renting of immovable property service, and the grounds raised in the cross-objection regarding unawareness of the levy of Service Tax and intentional evasion of payment.

Issue 1: Non-levy of Penalties
The Revenue filed an appeal against the Order-in-Original upholding proposed demands for Service Tax on renting of immovable property service but dropping the proposed penalties. The Additional Commissioner argued that non-levy of penalties was not justified as the assessee had not paid the tax demand. However, the Advocate for the Respondent referred to a judgment of the Madras High Court which set aside penalties on municipal corporations for the same activity, stating that no Government body could be imputed with the intent to commit fraud. The Tribunal noted that the chargeability to Service Tax by the Municipal Corporation had been settled by the High Court, and the issue in this appeal was solely regarding penalties. The Tribunal found no merit in the Revenue's appeal, citing the High Court's decision to set aside penalties in favor of the taxpayer.

Issue 2: Grounds raised in Cross-objection
The appellant raised grounds in its cross-objection, stating that the Municipality was unaware of the levy of Service Tax, there was no intentional evasion, and the lapse was due to unawareness. However, the Tribunal observed that the High Court had already upheld the leviability of Service Tax based on the same grounds raised by the appellant. Therefore, the Tribunal concluded that these grounds did not survive for a separate order by the Bench, as there was already a decision by the High Court on the matter.

In conclusion, the Tribunal dismissed the Revenue's appeal, stating that the chargeability to Service Tax by the Municipal Corporation had been settled by the High Court, and the issue in this appeal was limited to the non-levy of penalties. The Tribunal found no merit in the appeal and upheld the decision to drop the proposed penalties, in line with the High Court's judgment on similar cases involving municipal corporations.

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