The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax is not leviable on renting of immovable property service by religious body to religious body.
A show cause notice dated 07.04.2014 was issued to the assessee for the period 1.10.2008 to 30.9.2013 proposing to demand the service tax along with the interest and also for imposing penalty. Before adjudication the assessee paid the amount of service tax applicable to period after 30.06.2012 along with interest opting for Voluntary Compliance Encouragement Scheme (VCES). After due process of law the original authority confirmed the demand of service tax along with interest and imposed penalties for the period up to 30.06.2012.
The Counsel M.N. Bharathi appeared and argued for the assessee. It was submitted that in the present case the assessee is contesting the liability only for the period up to 30.06.2012. They have discharged the service tax along with interest for the period after 30.06.2012 under VCES and that an assessee is not liable to pay interest for service tax paid under VCES when within the prescribed date. However, the assessee inadvertently paid interest of Rs.3,40,382 along with the Service Tax. The assessee pointed out this fact to the adjudicating authority, who ordered for appropriation of the amount towards the interest payable by the assessee for the period prior to 30.06.2012 which is erroneous.
The counsel for the department contended that the assessee has not produced any document to show that they fall under the category of ‘religious body’. The certificate issued by the income tax is only for being a charitable association and not religious body. The same cannot be accepted for giving the benefit of crucial under renting of immovable property. The Adjudicating Authority has set aside the penalties for the period after 30.06.2012. Though the assessee has paid the service tax for the period after 30.06.2012 under VCES, the penalties ought to have been imposed for the reason that the assessee has paid the service tax only after the issuance of show cause notice.
A Two-Member Bench comprising Vasa Seshagiri Rao, Technical Member and Sulekha Beevi CS, Judicial Member observed that “After considering the facts of the case before us and also appreciating the documents produced, in nature of Memorandum of Association, we are of the considered opinion that the assessee fits in to the category of ‘religious body’. As per the definition of Renting of immovable property service, such service rendered by a religious body or to a religious body is excluded from the levy of service tax. We hold that the assessee herein is not liable to pay service tax under the category of renting of immovable property services up to 30.06.2012. Therefore, the demand for the period prior 30.06.2012 cannot be sustained and require to be set aside.”
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