The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed penalty on the ground that the matter relating to constitutional validity of levy of “Taxes on lands and buildings” is pending before the Supreme Court of India.
The appellants are engaged in “Renting of Immovable Property Service”. Show Cause Notice was issued to them treating them as ‘association of persons’ and service tax was demanded from them collectively. The original authority confirmed the service tax demand of Rs.13,67,139/- along with other adjudicatory liabilities. On appeal, Commissioner (Appeals) upheld the order of adjudication.
As per the directions of the Tribunal, the adjudicating authority proceeded to calculate the threshold limit of the service tax demand of three individuals based on the Notifications No. 4/2007-ST dated 1.3.2007 and No. 8/2008-ST dated 1.3.2008 and confirmed service tax demand of Rs.20,556/- each on the appellants by invoking extended period of limitation along with interest under the category of ‘Renting of Immovable Property Services’ under section 73(2) of the Finance Act, 1994 for the period 1.6.2007 to 31.3.2012.
The consultant for the appellants submitted that the appellants are not disputing the service tax demand and the interest as they have already paid the entire service tax liability along with interest and restricted the appeals only to setting aside the imposition of penalties on the appellants.
The Additional Commissioner (AR) supported the findings in the impugned order. It was submitted that but for the detection by the officers, the same would not have come to light and the authorities have rightly invoked the extended period and the penalties may be confirmed.
The Tribunal of M Ajit Kumar, Technical Member observed that “. In a case where the constitutional validity of the levy is yet to be decided the dispute is interpretational in nature. Hence reasonable cause has been made out for delayed payment of duty. In fact, due to legal complexities, the appellants are in the second round of litigation before this Tribunal. I, therefore, agree with the appellant that invocation of penalty in such a situation is not justified as per section 80 of the Finance Act, 1994 due to the reasonable cause shown.”
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