TaxTMI 
TaxTMI 
2024 (3) TMI 797
X X X X Extracts X X X X
X X X X Extracts X X X X
....I impose penalty of Rs. 1, 27,357 under Section 78 of the under Section 77 of the Finance Act, 1994. Finance Act, 1994, and Rs. 5000 3. I appropriate the amount of Rs. 96,903 already paid by the party and refrain from imposing any penalty with reference to this amount in accordance with Section 73(3) of the Finance Act, 1994." 2.1 The appellant is registered as manufacturer of goods and also is registered with the department as provider of "Business of Auxiliary Services" and recipient of service under the category of "Transport of Goods by Road Services. 2.2 During course of scrutiny of the balance sheet of the appellant it was observed that appellant had received an amount of Rs 11,52,000/- for the year 2006-07, Rs 12,09,600/- for the year 2007-08 (Rs 10,08,000/- for 01.06.2007 to 31.03.2008) and Rs 8,06,400/- for the year 2008-09 (upto November 08), towards the renting of immovable property. Services under the category of "Renting of Immovable Property" became taxable with effect from 01.06.2007. But the appellant did not take registration under this category nor discharged the service tax liability against these services provided by them. 2.3 Appellant claimed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the exemption limit. 3.3 Learned authorized representative reiterated the findings recorded in the impugned order 4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of argument. 4.2 The impugned order records as follows for holding against the appellants: "DISCUSSION & FINDINGS: ...... The issue in the instant appeal is related with simultaneous availment of exemption under the Notification No. 6/2005-ST, dt 01-03-2005 (as amended by Notification No. 4/2007-ST, dated 1-3-2007, w.e.f. 1-4-2007) and availment of cenvat credit under Cenvat Credit Rules, 2004. On a perusal of the case file, I observe that the appellants had received rent for commercial renting of "immovable property" during the relevant period which is covered under the service category of "Renting of Immovable Property" for payment of service tax w.e.f. 01.06.2007. The payment of service tax on the amount received under the category of "Renting of Immovable Property" has not been disputed by the appellant therefore it is amply clear that the service tax has correctly been levied by the department on the said amount. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elief that no service tax is payable on the instant services. The appellants have also referred to various case laws in support of their contention. I, find that the nonpayment of the service tax was not under a bonafide belief, because it is on record that correspondence in plenty was made by the department with the appellants to avail the opportunity of payment of service tax and avoid litigation, but the appellants failed to do. It is also on record that the amount which has already been paid by the appellants has not been considered for imposing penalty by the adjudicating authority. Thus, it appears that even after bringing the facts i.e. nonpayment of service tax to the notice of the appellants, they contravened the various provisions of the Finance Act, 1994 and suppressed the facts as discussed by the adjudicating authority and also failed to deposit the service tax before the issuance of the show cause notice, therefore the penalty imposed by the adjudicating authority under different Sections appears to be warranted." 4.3 The issue in the present case is in respect of the admissibility of the exemption under Notification no 6/2005-ST. The text of the said Notification ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fication shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification; (vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification; (vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and (viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs in the preceding financial year. 3. For the purposes of determining aggregate value not exceeding four ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sought to be denied is the fact that appellant have in their ST-3 return shown certain amounts as CENVAT credit. Following has been recorded in the show cause notice, "The party has replied vide their letter dated 17.02.2011 (Rud-10) that when they are availing the exemption of Rs 8 lacs, they did not avail the benefit of CENVAT Credit of services which have been received. However on going through the ST-3 returns filed by the party in Service tax Range-I, Division V, Ghaziabad during the period covered in audit, it is found that the version of audit appears to be correct as is evident by complied chart showing CENVAT Credit taken/ utilized as per ST-3 returns (RUD-11) Further on perusal of CENVAT credit details enclosed with the ST-3 return for the period April 2008 to September 2008, it is noticed that the party has availed credit for the year 2007-08, which was utilized in 2008-09. (Rud-12)." From the perusal of the above it is evident that the ST-3 return which has been relied upon by making the demand, against the appellant is for the period April 2008 to September 2008. As per this return the appellant have indicated the Opening Balance for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear 2007-08 was disclosed to the concerned jurisdictional officers while filing the ST-3 return for the period April 2008-September 2008. When the appellant had disclosed the information in respect of the CENVAT Credit in ST-3 return, revenue could not have proceeded to make this demand by alleging suppression. No ground for alleging suppression has been brought forth in the show cause notice or in the orders of lower authorities. The show cause notice alleging the suppression and invoking extended period of limitation for making demand for the period 2006-07 is bad in law. 4.7 Original authority has recorded as follows in the order in original for confirming the demand by invoking extended period: "4.7 Therefore the demand of service tax of Rs. 1,27,357 is liable to be confirmed against the party under proviso to Section 73 (1) of the Finance Act, 1994, along with interest as applicable under Section 75 of the Finance Act, 1994. The extended period of limitation is applicable upon the party as they never informed the Department as regards providing commercial Renting of Immovable Property Services and these facts came to notice of the Department only on the Audit Inspe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the first letter was written on 30.07.2010, when the much after expiry of normal period of limitation, when these letters as per the show cause notice were directing and reminding the appellant to deposit the amounts. of service tax determined. The show cause notice has been issued thereafter when the amounts were contested. This correspondence cannot be a ground for invoking an extended period of limitation. The bonafide belief of the appellant that this tax was not due from them is well founded in these correspondences. Further we note that the issue of renting of immovable property was in dispute and matter challenging constitutional validity of levy was taken before various high courts. Reference is made to the decisions of Hon'ble Delhi High Court in the case of Home Solution Retail India Ltd [2009 (237) E.L.T. 209 (Del.)] wherein following was held: "35. From this analysis, it is clear that we have to understand as to whether renting of immovable property for use in the course or furtherance of business or commerce by itself is a service. There is no dispute that any service connected with the renting of such immovable property would fall within the ambit of Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng, licensing or other similar arrangements for use in the course or furtherance of business or commerce barring certain exceptions. In Section 66(105)(zzzz), the taxable service was defined to mean any service provided to any person by any other person relating to the renting of immovable property for use in the course of or furtherance of business or commerce. The Parliament, by amendment, has differently positioned the words "in relation to". As we perceive, the Division Bench has laid down that the mere renting of immovable property for use in the course of or furtherance of business or commerce by itself could not entail any value addition. If the definition in Section 65(90a) is taken into consideration, there is a deeming concept with regard to service and the taxable service is based or founded on renting of immovable property. The learned senior counsel for the petitioner would contend that the Parliament cannot, by deeming fiction, create a tax liability to bring it within the purview of Entry 97 of List I as that would be an indirect entrenchment on Entry 49 of List II. Per contra, Mr. Chandhiok, relying on the decision in Tamil Nadu Kalyana Mandapam Assn. (supra), submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such renting and that too in the course or furtherance of business or commerce, the last part being important. While understanding the concept of service tax, it is to be kept in mind that it is both a general tax as well as a destination based consumption tax levied on services. Sometimes services can be "property based services" and "performance based services". The architects, interior designers and real estate agents would come in the category of performance service providers. 64. It is contended that when a property is leased or rented, the element of service is absolutely absent. In this context, the concept of rent has to be appositely understood. A rent is basically a reward paid for the use of the land. The tenant or the occupant pays the same to use the premises. In the economic concept, rent can be categorized into two heads, namely, contract rent and economic rent. Contract rent fundamentally refers to the total amount of money paid for use of the land and economic rent is a part of the total payment which is made for the use of land and it is estimated on many a ground. The economic rent can be contract rent minus interest on the capital invested. To give an e....