Diocese of Tanjore Society Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai held that appellant being religious body is liable to pay service tax for renting of immovable property only from 01.07.2012 and not before that date.
Facts- Based on an intelligence gathered by the Preventive Unit, it was revealed that the appellant was engaged in the activity of renting out their commercial building complexes located in and around Thanjavur to various tenants for commercial purposes. It appeared that the appellant being a service provider had not obtained registration from the department and had not paid the appropriate service tax on the taxable services provided by them. The total income received by them was reflected in their profit and loss statements based on which they had filed their income tax returns. The services of renting of immovable property for use in the course or furtherance of business or commerce is liable to service tax under the category of ‘Renting of Immovable Property service’ with effect from 1.6.2007 in terms of sec. 65(90a) of the Finance Act, 1994.
A Show Cause Notice was issued proposing to demand a service tax of Rs.87,96,460/- along with interest for the period from 1.4.2008 to 31.3.2013 and for imposing penalties. After due process of law, the adjudicating authority confirmed the demand along with interest and imposed equal penalty u/s. 78 besides penalty u/s. 77 of the Finance Act, 1994. Being aggrieved, the present appeal is filed.
Conclusion- Held that Revenue has failed to establish the Diocese is not a religious body and will be covered by the definition under section 65(90a) of the Finance Act 1994. Hence, we find that the appellant will be subject to levy under service tax for renting of immovable property only from 01/07/2012 and not before that date. The appellant also agrees that they are liable to pay service tax from 01/07/2012.
Held that the owners were under the bonafide belief that the said activity would not attract service tax liability. In a case where the constitutional validity of the levy is yet to be decided the dispute is interpretational in nature. We, agree with the appellant hence invocation of extended period is not justified.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed against Order-in-Original No. 2/2014-ST dated 10.1.2014 passed by the Commissioner of Central Excise and Service Tax, Trichy (impugned order).
2. Brief facts of the case are that intelligence gathered by the Preventive Unit, Thanjavur revealed that the appellant was engaged in the activity of renting out their commercial building complexes located in and around Thanjavur to various tenants for commercial purposes. It appeared that the appellant being a service provider had not obtained registration from the department and had not paid the appropriate service tax on the taxable services provided by them. The total income received by them was reflected in their profit and loss statements based on which they had filed their income tax returns. The services of renting of immovable property for use in the course or furtherance of business or commerce is liable to service tax under the category of ‘Renting of Immovable Property service’ with effect from 1.6.2007 in terms of sec. 65(90a) of the Finance Act, 1994. A Show Cause Notice dated 16.9.2013 was issued proposing to demand service tax of Rs.87,96,460/- along with interest for the period from 1.4.2008 to 31.3.2013 and for imposing penalties. After due process of law, the adjudicating authority confirmed the demand as proposed in the Show Cause Notice along with interest and imposed equal penalty under sec. 78 besides penalty under section 77 of the Finance Act, 1994. Aggrieved by the impugned order, the appellant is before the Tribunal.
3. No cross-objection has been filed by the respondent-department.
4. We have learned counsel Shri M.N. Bharathi for the appellant and Shri Harendra Singh Pal, learned Assistant Commissioner (AR) for the Department.
4.1 Shri M.N. Bharathi, learned counsel for the appellant submitted that the appellant is registered under the Societies Registration Act, 1860 and is under the direct control of the Bishop of Tanjore. As per the Memorandum of the Society its object is to promote the spiritual, educational, industrial, technical or agricultural and other interests primarily of the members of the Catholic Community but members of the other communities of the said Diocese of Thanjavur society are not excluded. The Diocese is a religious body being a part of Roman Catholic mission headed by the Pope. Further the term “religious body” has not been defined in the Finance Act 1994 and the laws applicable to service tax. The definition of ‘religious body’ is given at section 81 of the Equal Opportunity Act, 2010 as a body established for religious purpose etc. As per section 65(90a) of the Finance Act 1994, ‘renting of immovable property’ does not include renting, letting, leasing etc. by a religious body or to a religious body. Hence as letting on rent of their various commercial building complexes being a religious body was not subject to service tax up to 30.06.2012, they did not seek registration with the department till 08.04.2013. He stated that a society established for religious purposes can be registered under the Societies Registration Act for charitable purposes. The term ‘charitable purpose’ in Section 1 and 20 of the Societies Registration Act includes societies formed for religious purpose. He relied on the decision of the apex court of Hindu public vs Rajdhani Puja Samithee (AIR 1999 SC 964) to state that the term ‘charitable purpose’ also includes the advancement of religion. In the case of Radhaswamy Satsang Sabha vs Secretary of State India in Council 1939 [All. 757 = AIR 1939 All. 557] the Division Bench held with regard to the very Sabha that it was a religious and charitable institution and validly registered under Act No.21 of 1860. He also relied on Section 12AA of the Income tax act, 1961, and stated that the income of the appellant was exempt from inclusion under Section 11 ibid.’ This being so the department SCN dated 16.09.2013 demanding ST of Rs. 87,96,460/- was untenable. With respect to the extended period of limitation he stated that renting of immovable property by a religious body or to a religious body was bought into service tax levy from 01.07.2012 consequent to the negative list-based levy of service tax. Further, mega exemption Notification 25/2012 has also stated that service tax would not be liable to an entity that is registered under Section 12AA of the Income Tax Act. He further stated that the question whether “service tax” under Section 65(105)(zzzz) of the Finance Act, 1994 on renting of immovable property or any other service in relation to such renting, for use in the course of or, for furtherance of, business or commerce is within the legislative competence of the Union Parliament is still before the Hon’ble Supreme Court in the case of Union Of India vs UTV News Ltd., [2018 (13) GSTL 3 (SC)]. Therefore, the appellants were under the bonafide belief that the said activity would not attract tax liability. He submitted the following chart to trace the history of the legal developments regarding the impugned tax.
