Service tax demand upheld on property rental to vendors under Section 66E from July 2012

CESTAT Allahabad upheld service tax demand on appellant renting premises at Krishi Pradarshini, Aligarh to vendors for business activities. Tribunal held renting of immovable property became taxable service from 01.07.2012 under Section 66E of Finance Act, 1994. Appellant's registration under Section 12AA of Income Tax Act did not qualify for exemption under Notification No.25/2012, which applies only to charitable services. Extended period of limitation properly invoked as appellant deliberately avoided registration and tax payment despite knowing liability. Penalties under Sections 77 and 78, interest under Section 75, and late fees under Section 70 were upheld. Appeal dismissed.

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Issues Involved:
1. Violation of principles of natural justice.
2. Applicability of service tax under the category of 'Renting of Immovable Property Services'.
3. Exemption claim under Notification No. 25/2012-ST.
4. Invocation of extended period of limitation.
5. Imposition of penalties and interest.

Summary:

1. Violation of Principles of Natural Justice:
The appellant contended that the order was passed without being heard, violating natural justice principles. However, the Tribunal found that the Commissioner had provided five opportunities for personal hearings, which the appellant did not attend. Thus, the claim of violation of natural justice was dismissed, referencing the Supreme Court's decision in F.N. Roy Vs. Collector and Jethmal Vs. UOI.

2. Applicability of Service Tax under 'Renting of Immovable Property Services':
The Tribunal upheld the Commissioner's finding that the appellant's activities of renting out shops and vacant land for commercial purposes fall under 'Renting of Immovable Property Services' as defined under Section 66(E) of the Finance Act, 1994. The Tribunal noted that renting of immovable property is a declared service and taxable under the provisions of the Finance Act, 1994.

3. Exemption Claim under Notification No. 25/2012-ST:
The appellant claimed exemption as a charitable trust registered under Section 12AA of the Income Tax Act. The Tribunal rejected this claim, stating that the exemption under Notification No. 25/2012-ST applies only to services of a charitable nature provided by such entities, not to commercial activities like renting out property.

4. Invocation of Extended Period of Limitation:
The Tribunal found that the extended period of limitation was rightly invoked as the appellant had willfully not registered, paid service tax, or filed ST-3 returns despite being aware of their liability. The Tribunal referenced the decision in Bharat Automotive Pressings (I) Pvt. Ltd. and noted that the appellant's conduct indicated an intent to evade tax.

5. Imposition of Penalties and Interest:
The Tribunal upheld the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994, and the demand for interest under Section 75. The penalties were justified due to the appellant's deliberate non-compliance and suppression of facts. The Tribunal also upheld the late fee for non-submission of ST-3 returns, finding it reasonable.

Conclusion:
The appeal was dismissed, and the Tribunal upheld the original order, confirming the demand for service tax, interest, and penalties. The appellant's arguments on natural justice, exemption, and limitation were rejected, and the Tribunal emphasized the appellant's willful non-compliance and intent to evade tax.

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