Super Electricals Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Summary: CESTAT Chennai allowed the appeal of M/s Super Electricals and set aside the service tax demand of Rs.12,43,210/- on “renting of immovable property” service for the period April 2008 to March 2009, together with applicable interest and equivalent penalty. The dispute arose from Order-in-Appeal No.372/2015 (CXA-II) dated 28.10.2015. The appellant, a manufacturer of electrical steel transformer laminations, had leased its premises to M/s. Anmod Stamping Pvt. Ltd. and collected rent of Rs.1,02,00,000/- during 2008-09. The Department issued the show cause notice only on 04.10.2013 by invoking the extended period of limitation. :chatgpt-content-reference{index=”0″}
The appellant contended that the levy itself was debatable during the relevant period because the Delhi High Court in Home Solution Retail India Ltd., 2009 (14) STR 433 (Del), had held that renting of immovable property by itself did not constitute a taxable service. It was only through the Finance Act, 2010 that the law was retrospectively amended to clarify and validate the levy. The appellant relied upon the TRU clarification and several judicial decisions to contend that the uncertainty in law and subsequent retrospective amendment ruled out suppression and consequently invocation of the extended limitation period.
The Tribunal accepted the limitation plea. It noted that the Delhi High Court’s decision dated 18.04.2009 had held that Section 65(105)(zzzz) did not make mere renting of immovable property for business or commerce taxable. CBEC thereafter clarified that the definition was being retrospectively amended from 01.06.2007 to clarify legislative intent and bring certainty to the tax liability. The Tribunal observed that the Finance Bill, 2010 containing the retrospective provision was enacted on 08.05.2010. Even the jurisdictional range officer advised the appellant to pay tax only in November 2011, followed by a reminder in December 2011, whereas the show cause notice was issued almost two years later on 04.10.2013.
The Tribunal held that no protective show cause notice had been issued during the intervening period when the levy had been held untenable by the Delhi High Court. Clarity emerged only after the retrospective amendment, something which the appellant could not have had the prescience to know during the period in dispute. The issue was therefore debatable, and the extended period could not be invoked. Since the show cause notice dated 04.10.2013 was issued well beyond one year from the relevant date, the entire demand was held barred by limitation.
The Tribunal also relied upon Jindal Vegetable Products Ltd v CCE, Meerut-II, 2013 (31) STR 367 (Tri-Del), where, in an identical dispute concerning renting of immovable property for 2007-08 to 2008-09, the Tribunal had held that an assessee could not be accused of suppression when doubt about the levy persisted until the retrospective amendment by the Finance Act, 2010. That decision had applied the Supreme Court’s principle in Continental Foundation Jt. Venture, 2007 (216) E.L.T. 177 (S.C.), concerning the inapplicability of extended limitation where interpretation of law was doubtful. The Chennai Bench further noted similar reasoning in M/s. Utkal Builders Limited, M/s. Aditya Homes (P) Ltd., Infinity Infotech Parks Ltd. and Venus Laminations P Ltd. Accordingly, the demand, interest and penalties were held untenable, the impugned Order-in-Appeal was set aside and the appeal was allowed with consequential benefits in law, if any.
Cases Discussed
- Home Solution Retail India Ltd., 2009 (14) STR 433 (Del) — The Delhi High Court decision was relied upon to establish that during the disputed period mere renting of immovable property had been held not to constitute a taxable service, demonstrating the prevailing uncertainty in law.
- M/s. Utkal Builders Limited, 2023 (9) TMI 1285-CESTAT KOLKATA — Relied upon by the appellant and noted by the Tribunal as adopting a similar reasoning against invocation of extended limitation in the context of renting of immovable property.
- M/s. Aditya Homes (P) Ltd., 2019 (9)TMI 793- CESTAT Hyd — Relied upon by the appellant and noted by the Tribunal as taking a similar view.
- Jindal Vegetable Products Ltd v CCE, Meerut-II, 2013 (31) STR 367 (Tri-Del) — Followed on an identical issue; uncertainty regarding the renting levy until the retrospective amendment prevented invocation of the extended limitation period and Section 78 penalty.
- Infinity Infotech Parks Ltd., 2014 (36) STR 37 (Cal) — Noted as adopting a similar line of reasoning on limitation.
- Venus laminations P Ltd., 2018 (3) TMI 1002- CESTAT Ahmedabad — Noted as adopting similar reasoning concerning limitation.
- Continental Foundation Jt. Venture, 2007 (216) E.L.T. 177 (S.C.) — Applied in the extracted Jindal Vegetable Products decision for the principle that extended limitation cannot be invoked where there was doubt in interpretation of law arising from conflicting judicial views.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The appellant has preferred this appeal being aggrieved by the impugned order in appeal (OIA) by which the learned appellate authority has upheld the order in original (OIO) confirming the demand of duty of Rs.12,43,210/-made on the appellant on ‘renting of immovable property’ service rendered during the period April 2008 to March 2009 along with demand of interest at appropriate rates and equivalent penalty imposed.
2. The facts are that the appellants who are manufacturers of Electrical Steel Transformer laminations had registered as a service provider for providing taxable service of “renting of immovable property” with effect from 28-05-2009. During verification of their accounts, it was noticed that the appellants had leased out their premises to M/s. Anmod Stamping Pvt Ltd on rent during the period 2008-09 collecting a sum of Rs.1,02,00,000/-. The Department being of the view that this amounted to providing taxable service of “renting of immovable property” advised the appellant vide letters dated 21.11.2011 and 16.12.2011 to pay the service tax on the rent received but the appellants did not respond and therefore a show cause notice No.96/2013 dated 04.10.2013 was issued invoking extended period of limitation and calling upon the appellant to pay the service tax demand along with appropriate interest thereon and proposing imposition of penalties. The show cause notice came to be adjudicated vide OIO dated 01-12-2014 whereby the adjudicating authority confirmed the demand along with appropriate interest and imposed penalties under Section 77 and 78 of the Act. Aggrieved by the impugned OIO, the appellant preferred an appeal before the Commissioner Appeals, who vide the impugned OIA upheld the OIO passed by the adjudicating authority along with interest and penalty imposed under Section 78 of the Finance Act, while setting aside the penalty imposed under Section 77 of the Act. Aggrieved by the OIA, the appellant has preferred this appeal and is before the Tribunal.
3. Shri. Saurabh dixit, Advocate, appeared and argued for the appellant. The Ld. Counsel submits that the demand is barred by limitation as the SCN dated 04.10.2013 was issued for the period pertaining to 2008-09 and the issue relating to “renting of immovable property” services was debatable due to divergent views existing with the Delhi High Court in the case of Home Solution Retail India Ltd, 2009 (14) STR 433 (Del) holding the levy to be inapplicable. It is his submission that it was only vide Finance Act, 2010 that the scope of such levy was suitably amended “retrospectively” to validate the demand of such tax already raised and even the TRU clarification bearing DOF No.334/1/2010-TRU dated 26.02.2010 at para 9.2 clarifies that the retrospective amendment was to clarify the legislative intent and to also bring “certainty” in tax liability of renting of immovable property, thereby meaning that there was confusing during the material period and hence the necessity of retrospective amendment. He submitted that in identical circumstances the Tribunal has in various decisions held the demand of service tax under renting of immovable property services to be time barred in light of the retrospective amendment made in law and relied on the decisions in M/s. Utkal Builders Limited, 2023 (9) TMI 1285-CESTAT KOLKATA, M/s. Aditya Homes (P) Ltd, 2019 (9)TMI 793- CESTAT Hyd, Jindal Vegetable Products Ltd, 2013 (31) STR 367 (Tri-Del), Infinity Infotech Parks Ltd, 2014 (36) STR 37 (Cal), Venus laminations P Ltd, 2018 (3) TMI 1002- CESTAT Ahmedabad.
4. Shri. N. Satyanarayana, Ld. Authorised Representative for the Respondent, reiterated the findings of the Appellate Authority. He contended that the Appellate Authority had rightly held that the bonafide doubt of the appellant regarding the constitutional validity of the said service cannot absolve the appellant from payment of service tax as it is not in dispute that the appellant had rented out the said premises for commercial purposes and had collected rent, but had not paid the service tax. The retrospective amendment crystallized the appellant’s liability and the appellant was therefore liable to pay the service tax demanded.
5. Heard both sides and perused the records as well as the orders submitted as relied upon.
6. We find that the only issue that arises for determination is whether the demand made vide SCN dated 04.10.2013 on the appellant requiring the appellant pay service tax on “renting of immovable properties” service rendered during the period 2008-09 is tenable or not.
7. Admittedly the appellant did not pay the service tax during the relevant period. It is also indisputable that the Delhi High Court had vide its order dated 18-04-2009 in Home Solution Retail India Ltd, 2009 (14) STR 433 (Del) held that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The CBEC vide Letter D.O. F. No. 334/3/2010-TRU, dated 1-7-2010 on the subject of changes proposed in service tax law and procedure in Union Budget 2010-11, has at para 9.2 stated that “9.2 In order to clarify the legislative intent and also bring in certainty in tax liability the relevant definition of taxable service is being amended to clarify that the activity of renting of immovable property per se would also constitute a taxable service under the relevant clause. This amendment is being given retrospective effect from 1-6-2007.” The Finance Bill 2010 containing Section 77 which provided for the said retrospective legislation was enacted on 8th May 2010. Admittedly, the jurisdictional range officer had deemed it fit only in November 2011, followed by a reminder in December 2011 to advise the appellant to pay the service tax rent on the rent received during 2008-2009 and it was only almost two years thereafter on 04.10.2013 that the SCN was issued invoking the extended period. Evidently, there was no protective SCN issued during the interregnum when the levy was held untenable by the Delhi High Court’s Judgement and clarity thereafter ensued only after the retrospective amendment introduced after the enactment of the Finance Bill 2010, which the appellant could not have the prescience to know. Hence, we are of the view that the appellant was justified in its contention that during the period the issue was debatable and therefore the question of sustaining the demand by invoking the extended period of limitation does not arise. We hold that the demand is hit by limitation, the SCN dated 04.10.2013 having been issued well beyond one year from the relevant date. We are of the view that the impugned Order in Original to the extent it confirms the demand alongwith applicable interest and imposition of equivalent penalty on the appellant is therefore liable to be set aside.
8. We also notice that in the decision in Jindal Vegetable Products Ltd v CCE, Meerut-II, 2013 (31) STR 367 (Tri-Del), on an identical issue where demand of service tax was made on renting of immovable property services for the period 2007-2008 to 2008-09, the Tribunal has held in para 6 as under:
“6. There is no dispute that the activity of the appellant was renting of immovable property. Though “service in relation to renting of immovable property” had been brought within the service tax net w.e.f. 1-6-2007 by introducing Section 65(105)(zzzz), the validity of this levy had been challenged before the Hon’ble Delhi High Court and Hon’ble Delhi High Court vide judgment dated 18th April, 2009 in the case of Home Solution Retail India (supra) held that mere renting of immovable property by itself cannot be regarded as service and would not attract service tax. It is only by retrospective amendment introduced w.e.f. 1-6-2007 by Finance Act, 2010, that the renting of immovable property by itself became a taxable service neutralising the judgment of judgment of Hon’ble Delhi High Court. In the circumstances of the case, I am of the view that the appellant cannot be accused of suppressing the relevant information from the department as during the period of dispute there was doubt about the levy of service on the renting of immovable property till the dispute was put to an end by retrospective amendment made by Finance Act, 2010. Hon’ble Apex Court in the case of Continental Foundation Jt. Venture reported in 2007 (216) E.L.T. 177 (S.C.), has held that when during the period of dispute there was doubt about interpretation of some provisions of law on account of conflicting judgments, which were later on resolved by a Larger Bench, the extended period under proviso to Section 11A(1) cannot be invoked. I am of the view that the ratio of this judgment of Apex Court is squarely applicable in this case and in this case the longer limitation period under proviso to Section 73(1) would not be applicable and for the same reason, the penalty under Section 78 of the Finance Act, 1994 also would not be attracted, as the elements required for invoking longer limitation period under proviso to Section 73(1) are the same as those required for imposing penalty under Section 78 of the Finance Act, 1994. Thus, the entire service tax demand is time barred. The impugned order is, therefore, not sustainable. The same is set aside. The appeal is allowed.”
9. We note that similar line of reasoning has been subsequently adopted in the decisions in M/s. Utkal Builders Limited, 2023 (9) TMI 1285-CESTAT KOLKATA, M/s. Aditya Homes (P) Ltd, 2019 (9)TMI 793- CESTAT Hyd, Infinity Infotech Parks Ltd, 2014 (36) STR 37 (Cal), and Venus laminations P Ltd, 2018 (3) TMI 1002- CESTAT Ahmedabad.
10. In view of the discussions and findings above and in the light of the aforementioned decisions of the Tribunal, we find that the demands of duty, appropriate interest and penalties imposed by the original authority as upheld by the learned appellate authority, are untenable. Accordingly, we set aside the impugned Order in Appeal. The Appeal is allowed with consequential benefits in law, if any.
(Order pronounced in the open court on 17.04.2025)
