Pazhayapally Muslim Jama Ath Vs Commissioner of Central Excise (CESTAT Bangalore)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore remanded a dispute relating to service tax demand on rental income earned by a religious institution after noting inconsistent departmental decisions on the same exemption issue.
The appellant, a religious body registered under Section 12A of the Income Tax Act, had rented out premises during the period from 01.07.2012 to 31.12.2013 but did not pay service tax on the rental income. A show cause notice dated 09.05.2014 demanded service tax of Rs. 4,36,657 along with interest and penalties. The adjudicating authority confirmed the demand with equivalent penalty under Section 78 and other penalties under the Finance Act, 1994, which was later upheld by the Commissioner (Appeals).
Before CESTAT, the appellant argued that renting of shops within its premises was exempt under Entry 5(a) of Notification No. 25/2012-ST dated 20.06.2012 applicable to religious bodies. The appellant also pointed out that for later periods, the Department itself had dropped similar service tax demands through subsequent appellate and adjudication orders relying on Board Circulars.
The Tribunal observed that the Commissioner (Appeals) had denied exemption for the period 01.07.2012 to 31.12.2013 in the impugned order dated 27.04.2017, whereas in a later order dated 16.11.2018 relating to January 2014 to March 2015, the same authority had decided the issue in favour of the appellant. The later order was also followed for subsequent periods and demands were dropped.
