2024 (1) TMI 85 - AT - Service Tax

Tribunal Rules on Service Tax: Upholds Tax on Property Rent but Annuls Penalty Due to Pre-Notice Payment.

The Appellate Tribunal CESTAT New Delhi addressed the issue of service tax on renting immovable property. The Tribunal partially upheld the tax demand but ... Penalty for failure to pay service tax - Payment of service tax prior to issuance of show cause notice negating penalty - Reasonable cause defence under Section 80 of the Finance Act, 1994 - Exception for fraud, collusion, wilful mis statement or suppressionPenalty for failure to pay service tax - Payment of service tax prior to issuance of show cause notice negating penalty - Reasonable cause defence under Section 80 of the Finance Act, 1994 - Whether the penalty imposed on the appellant for non payment of service tax was sustainable where the service tax was paid by the appellant prior to issuance of the show cause notice and no evidence of fraud or suppression was demonstrated by the department. - HELD THAT: - The Tribunal found as an undisputed fact that the amount of service tax confirmed against the appellant had been deposited by the appellant prior to issuance of the impugned show cause notice and that the appellant did not dispute liability for the tax. Applying the proviso to the provision dealing with penalty for failure to pay service tax and Section 80 of the Finance Act, 1994, the Tribunal observed that where the tax liability is deposited before the show cause notice is issued and there is no proof of fraud, collusion, wilful mis statement or suppression, penalty is not imposable. The appellant asserted the non payment was an inadvertent error; the department did not produce evidence of any positive act amounting to intentional evasion. On these findings the Tribunal held that the conditions for invoking penalty were not satisfied and that Section 80 operated to preclude imposition of penalty in the circumstances of the case. [Paras 5, 6, 7]Penalty imposed on the appellant is set aside and the appeal is partly allowed to that extent.Final Conclusion: The Tribunal set aside the penalty imposed for failure to pay service tax because the tax was paid before issuance of the show cause notice and no evidence of fraud or suppression was shown; the appeal is partly allowed accordingly. Issues involved: Demand of service tax on renting of immovable property, imposition of penalty on appellant.Summary:The judgment by the Appellate Tribunal CESTAT NEW DELHI dealt with a case involving the demand of service tax on renting of immovable property by the appellant. The department observed that the appellant had not paid service tax on the amount of building rent received from the bank, leading to a demand of Rs. 4,72,462. The Tribunal partially confirmed the demand but dropped the rest relying on a previous decision. However, a penalty was imposed on the appellant, which led to the appeal before the Tribunal.Regarding the imposition of penalty, the appellant argued that the demand on rent was not deposited due to inadvertent error, and the payment was made before the issuance of the show cause notice. The appellant acknowledged the demand but challenged the penalty imposition. The Departmental Representative argued that the penalty was rightly imposed due to suppression on the appellant's part.After hearing both parties, the Tribunal noted that the amount in question was paid by the appellant before the issuance of the show cause notice. The appellant did not dispute the liability towards the amount but contested the penalty. Relying on the provisions of Section 76(1) and 80 of the Finance Act, 1994, the Tribunal held that no penalty should be imposed if the tax liability is deposited within 30 days of the show cause notice. Since the appellant had deposited the amount before the notice was served, the penalty was deemed unjustified. The Tribunal found no evidence of intentional evasion by the appellant and set aside the penalty, partially allowing the appeal.In conclusion, the Tribunal set aside the penalty imposed on the appellant, citing the timely payment of the tax liability and lack of evidence of intentional evasion. The appeal was partly allowed in favor of the appellant.