Conflicting Judicial Views: Extended Limitation not Invocable – CESTAT Chandigarh

Onkar Associates Vs Commissioner of Central Excise & Service Tax (CESTAT Chandigarh)

The appellant had rented its godowns to Punjab State Warehousing Corporation during the periods 01.06.2007 to 31.03.2010, 01.04.2010 to 30.09.2010, and 01.10.2010 to 31.03.2011. The Department alleged that the appellant had provided “Renting of Immovable Property Service” from 01.06.2007 without paying service tax. Three show cause notices were issued for different periods seeking recovery of service tax of ₹6,88,859, along with interest and penalties. The Joint Commissioner confirmed the demands through the Order-in-Original dated 05.03.2012, and the Commissioner (Appeals) dismissed the appellant’s appeal.

Before the Tribunal, the appellant contended that the demand for the period June 2007 to March 2010 was barred by limitation under Section 73 of the Finance Act. It submitted that during the relevant period there were conflicting judicial views regarding the levy of service tax on renting of immovable property. Although the service was brought under the tax net with effect from 01.06.2007 by introducing Section 65(105)(zzzz), the Delhi High Court, in Home Solution Retail India Ltd., had held that mere renting of immovable property was not a taxable service. The appellant further submitted that the Finance Act, 2010 retrospectively amended the provision with effect from 01.06.2007, making renting of immovable property taxable and neutralising the earlier judgment.

The appellant argued that, where conflicting judicial views exist, adoption of a view favourable to the assessee constitutes a bona fide belief and the extended period of limitation cannot be invoked. In support, it relied upon the decisions in Heubach Colour Pvt. Ltd., affirmed by the Gujarat High Court, and other judicial precedents, including Larsen & Toubro Ltd. and Home Solution Retail India Ltd. It also relied on the Tribunal’s decision in VIR Enterprises, which, following the Calcutta High Court judgment in Infinity Infotech Parks, held that where the extended period is not invocable, the demand cannot be sustained even for the normal period.

On the issue of penalty, the appellant submitted that it was entitled to the benefit of Section 80(2) of the Finance Act, 1994. It contended that, in respect of renting of immovable property service under Section 65(105)(zzzz), no penalty could be imposed if the service tax along with interest was paid within six months from the enactment of the Finance Act, 2012. The appellant stated that it had paid the entire service tax and interest on 26.11.2012, within the prescribed period.

The Department supported the findings of the impugned order.

After considering the submissions, the Tribunal observed that conflicting judicial decisions existed during the relevant period regarding the taxability of renting of immovable property. It noted that the Delhi High Court had initially held that mere renting of immovable property was not a taxable service and that the position changed only after the retrospective amendment introduced by the Finance Act, 2010, which was subsequently upheld by the Delhi High Court.

The Tribunal relied on its earlier decision in Heubach Colour Pvt. Ltd., affirmed by the Gujarat High Court, which held that where conflicting views prevail and an assessee adopts a favourable interpretation, such conduct reflects a bona fide belief and the extended period of limitation cannot be invoked in the absence of any wilful misstatement or suppression of facts.

The Tribunal also relied on its decision in VIR Enterprises, following the Calcutta High Court judgment in Infinity Infotech Parks, which held that where the extended period of limitation is held to be unavailable, the show cause notice cannot be treated as valid for the normal period in respect of the same transactions. The Tribunal further noted that the Principal Bench had followed the same principle in Shyam Spectra.

Applying these decisions, the Tribunal held that the entire demand was barred by limitation and could not be sustained even for the normal period. Consequently, it allowed the appeal on the ground of limitation without examining the merits of the case.

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

The present appeal is directed against the impugned order dated 09.12.2014 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has rejected the appeal of the appellant and upheld the Order-in-Original.

2. Briefly the facts of the present case are that the appellants have rented out their godowns to M/s Punjab State Warehousing Corporation for which the appellant was getting rent during the period 01.06.2007 to 31.03.2010, 01.04.2010 to 31.09.2010 & 01.10.2010 to 31.10.2011. As per the Department, the appellant has provided “Renting of Immovable Property Service” to M/s Punjab State Warehousing Corporation w.e.f. 01.06.2007 but has not paid the service tax on the said service. On these allegations, the appellant was issued three SCNs of different period for the same issue for recovering of service tax, interest and imposition of penalty as per the details given below:

3. The appellant filed reply contesting the demand of service tax and after following the due process, the Joint Commissioner confirmed the demand of service tax as proposed in the SCN vide Order-in-Original dated 05.03.2012. Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals), who rejected the same. Hence, the present appeal.

4. Heard both sides and perused the records of the case.

5. Learned Counsel for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts, the law and the binding judicial precedents. He further submits that the demand for the period June 2007 to March 2010 raised in the SCN dated 07.01.2011 is barred by limitation as provided under Section 73 of the Finance Act. He further submits that during the relevant time, there was conflicting views as to whether the appellant is liable to pay service tax on Renting of Immovable Property. He further submits that though the service tax in relation to Renting of Immovable Property has been brought within the service net w.e.f. 01.06.2007 by introducing Section 65(105)(zzzz); the validity of the said levy were challenged before the Hon’ble Delhi High Court and the Hon’ble Delhi High Court, vide judgment dated 18.04.2009 in the case of Home Solution Retail India Ltd. – 2009 (14) STR 433 (Del.), held that mere renting of immovable property by itself cannot be regarded as service and would not attract service tax. He further submits that retrospective amendments were introduced w.e.f. 01.06.2007 by Finance Act, 2010 vide which Renting of Immovable Property by itself became a taxable service neutralizing the judgment of the Hon’ble Delhi High Court. He further submits that it is a settled law that in case where conflicting views are present and assessee adopts a view favorable to him then it is considered as bona fide belief and extended period for issuance of SCN cannot be invoked. For this submission, he relied upon the decision in the case of M/s Heubach Colour Pvt. Ltd. Vs CCE, Surat-II – 2007 (211) ELT 406 (Tri. Ahmd.) which was also affirmed by the Hon’ble Gujarat High Court in the case of CCE, Surat-II Vs M/s Heubach Colour Pvt. Ltd. He has also cited the following judgments wherein it has also been held that when there are conflicting views on the issue, extended period cannot be invoked.

• M/s Larsen & Toubro Ltd. Vs. CCE, Pune-II – 2007 (211) ELT 513 (SC).
• Home Solution Retail India Ltd. Vs. UOI – 2009 (14) STR 433 (Del.)
• Home Solution Retail India Ltd. Vs. UOI – 2011 (21) STR 109 (Del.)
• Home Solution Retail India Ltd. Vs. UOI – 2011 (24) STR 129 (Del.)

6. Learned Counsel also submits that the appellant had a bona fide belief in view of the judgments cited supra that they are not liable to pay service tax. Learned Counsel also relied upon this Bench’s decision in the case of VIR Enterprises VS CCE, Chandigarh –I vide Final Order No.60065/2025 dated 13.01.2025 in ST/1101/2011 wherein the Tribunal held that when the extended period of limitation is invoked and the same is not found invokable, the demand for the normal period also cannot be sustained in view of the judgment of Hon’ble Kolkata High Court in the case of Infinity Infotech Parks – 2014 (36) STR 37 (Cal.) decided on 30.04.2014.

7. As regards the penalty, the appellant is entitled to the benefit of Section 80(2) of the Finance Act whereby no penalty can be levied under Section 76 or Section 77 or Section 78 if the service tax along with interest is paid within 06 months of the date on which Finance Bill 2012 received the assent of the Hon’ble President of India i.e 28.05.2012.

8. Learned Counsel further submits that on plain reading of sub-Section (2) of Section 80 of the Finance Act, 1994 it becomes clear that as regards service referred in Section 65(105)(zzzz) of the Finance Act, 1994 relating to Renting of Immovable Property, penalty cannot be imposed in case of failure to pay service tax, which was payable as on 06.03.2012 if the amount of service tax along with interest is paid within 06 months from the date of enactment of the Finance Act, 2012, i.e. 27.11.2012. He further submits that the appellant has paid the whole of the service tax along with interest on 26.11.2012, which is well within 06 months of the date and therefore, the appellant is entitled to the relief as provided by Section 80(2) of the Finance Act, 1994.

9. On the other hand, learned Authorized Representative for the Department reiterates the findings of the impugned order.

10. After considering the submissions of both the parties and perusal of the material on record, we find that during the relevant period, there were conflicting judgments as to whether the appellants are liable to pay service tax on Renting of Immovable Property. In fact, Renting of Immovable Property was brought within the service tax net w.e.f. 01.06.2017 by introducing Section 65(105)(zzzz) and its validity was challenged before the Hon’ble Delhi High Court and the Hon’ble Delhi High Court held that mere renting of immovable property by itself cannot be regarded as service and would not attract service tax. Subsequently, a retrospective amendment was brought w.e.f. 01.06.2017 by Finance Act, 2010 and the Renting of Immovable Property by itself became a taxable service and the said amendment was upheld by the Hon’ble Delhi High Court. Further, we find that the Tribunal, in the case of M/s Heubach Colour Pvt. Ltd.(supra), has held that when there were conflicting views and the assessee adopts a view favorable to him then it is considered as bona fide belief and extended period of limitation cannot be invoked. The Tribunal in the said decision has held as under:

8. Admittedly, there were conflicting decisions and different opinions, as regards the eligibility of the assessees to Notification No. 8/97-C.E. It was in view of the said conflicts that the matter was referred to Larger Bench. It is well settled that when two views are holding the field, the assessee adopting interpretation favourable to him can be said to be under a bona fide belief of his entitlement to the Notification. Inasmuch as the law was declared by Larger Bench on 9-12-2005, the appellant cannot be charged with any willful misstatement or deliberate suppression of facts with intent to evade duty. In any case, we find that while dealing with the said aspects, Commissioner has not referred to any positive attempt on the part of the appellant to keep the said vital information away from the Department. As such, we are of the view that the demand of duty raised beyond the normal period of limitation is barred and hence not sustainable. For quantification of the demand within the period of limitation, the matter is being remanded to the original adjudicating authority.

11. We also find that the decision of the Tribunal has been upheld by the Hon’ble Gujarat High Court as reported in 2009 (245) ELT 49 (Guj.). Further, we find that this Bench of the Tribunal, in the case of M/s VIR Enterprises Vs CCE, Chandigarh-I (cited supra), by following the judgment of the Hon’ble Kolkata High Court in the case of Infinity Infotech Parks (supra) has held that when the extended period is not invokable, the demand for the normal period cannot be sustained. The Hon’ble Kolkata High Court in the said decision, has observed as follows:

“92. When a notice is issued in support of transactions spread over a period of time and it is found that the extended period of invocation has been invoked, the notice cannot be treated as within limitation for some of the same transaction, once it is found that the extended period of limitation is not invocable. This proposition find support from the judgment of the Supreme Court in Collector of Central Excise, Jaipur v. Alcobex Metals reported in (2003) 4SCC 630=2003 (153) E.L.T. 241 (S.C.).”

12. Further, the Principal Bench of the CESTAT has also followed the said decision in the case of Shyam Spectra vide Final Order No. 56196/2024 dated 31.07.2024. In view of the decision cited supra, we are of the considered opinion that the demand in the present case is completely barred by limitation and the same cannot be confirmed even for the normal period. In view of this, we allow the appeal on limitation without going into the merits of the case.

(Order pronounced in the open court on 27/10/2025)