Extended Period Not Invokable: CESTAT Rules Constitutional Validity of 'Renting of Immovable Property' Levy is Still Pending Before SC [Read Order]
The Bench observed that in a case where the constitutional validity of the levy is yet to be decided, the dispute is interpretational in nature hence invocation of extended period was not justified.
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the extended period of limitation cannot be invoked in cases involving the "Renting of Immovable Property" service and observed that the constitutional validity of the levy itself is still pending final decision before the Supreme Court.
Rupinder Sagar Garg (appellant) was joint owner of an immovable property situated in Patiala, Punjab. The appellant received rental income from Columbia Asia Hospital Pvt Ltd. During a survey, the Department found that while the hospital was paying substantial rent, the appellants had filed ST-3 returns showing 'NIL' gross amount received.
Alleging suppression of facts to evade tax payment, the department issued a Show Cause Notice to the appellant demanding Service Tax amounting to Rs. 60,74,673 for the period 01.09.2007 to 31.03.2011.
The Adjudicating Authority subsequently dropped the demand for the period prior to 01.07.2010 but confirmed a demand of Rs. 12,93,803 for the post-July 2010 period under Section 73 of the FinanceAct, 1994, invoking the extended period of limitation.
The Counsel for the appellant did not contest the matter on merits but challenged the invocation of the extended period. The counsel argued that the appellant held a bona fide belief that renting of immovable property was not subject to Service Tax due to the tumultuous legal history of the levy.
The counsel asserted that the amendment introducing the service was subject to various challenges before the High Courts (notably Home Solution Retail India Ltd) and was stayed multiple times.
Furthermore, the counsel submitted that the Hon'ble Supreme Court in Union of India vs. UTV News Ltd had deferred cases on this issue until the nine-judge bench decided the matter in Mineral Area Development Authority and others vs. Steel Authority of India and others. Therefore, the counsel argued that no intent to evade could be attributed to them.
The CESTAT bench comprising Mr. S. S. Garg (Judicial Member) and Mr. P. Anjani Kumar (Technical Member) observed that the levy on Renting of Immovable Property has a complex legislative history, with retrospective amendments and stays granted by the Delhi High Court.
The Tribunal noted that the core question of law regarding the scope of "Taxes on Lands and Buildings" is currently pending before a Larger Bench of the Supreme Court.
Relying on the decision of the Chennai Tribunal in Diocese Of Tanjore Society vs. CCE & CGST, the Bench observed that in a case where the constitutional validity of the levy is yet to be decided, the dispute is interpretational in nature hence invocation of extended period was not justified.
The Tribunal held that since the Lease Deed was executed in 2007 when the service was not taxable, and given the subsequent legal uncertainty, suppression could not be alleged. Consequently, the demand for the extended period was unsustainable.
Citing the Calcutta High Court ruling in Infinity Infotech Parks Ltd, the Tribunal further noted that once the extended period was found not invokable in such notices, the demand cannot be sustained even for the normal period.
The tribunal set aside the order solely on the ground of limitation. The appeal of the appellant was allowed.
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