Marthoma Cheriya Pally Vs Commissioner of Central Excise (CESTAT Bangalore)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore partly allowed the appeal filed by a religious church registered as a charitable trust against the Order-in-Appeal dated 23 February 2018, which had confirmed service tax demand on rental income from immovable properties for the period after 1 July 2012. The Commissioner (Appeals) had held that the appellant was not entitled to the benefit of Notification No. 25/2012-ST dated 20 June 2012 and had reduced the penalty under Section 78 of the Finance Act, 1994 to 50% of the service tax upheld.
The appellant argued that it was entitled to exemption under Clause 4 of Notification No. 25/2012-ST because it was registered under Section 12AA of the Income Tax Act, 1961 and charitable activities under the notification included advancement of religion. The Revenue contended that the appellant did not qualify for the exemption and relied upon an earlier Tribunal decision holding that service tax was payable on similar facts for the period after 1 July 2012.
The Tribunal examined the provisions of Notification No. 25/2012-ST, including the exemption available for services provided by entities registered under Section 12AA by way of charitable activities and for renting of precincts of a religious place meant for the general public. It noted that the appellant was a Jacobite Syrian Church registered under the Charitable and Religious Trust Act and Section 12AA of the Income Tax Act. It was undisputed that the church owned shopping complexes within its premises and had rented these commercial shops to tenants for business purposes. The Tribunal observed that renting of immovable property used for business or commerce was liable to service tax under the Finance Act, 1994, and since the premises were rented out as commercial shops, the activity was taxable.
