RAMESH NAIR

1. The present appeal is directed against the impugned Order-In-Appeal No. AHM-SVTAX-OOO-APP-066-14-15 dtd. 05.06.2014 passed by the Commissioner(Appeals) Central Excise & Service tax, Ahmedabad.

2. The brief facts of the case are that during the course of audit it was observed that appellant had made short payment of service tax under the category of „Management Consultancy Service‟ amounting to Rs. 10,30,000/- and interest applicable thereon amounting to Rs. 2,03,601/- during the period April 2009 to September 2009. Detailed scrutiny revealed that the appellant had charged service tax to the tune of Rs. 1 crore on bills raised by the appellant to M/s Adani Energy Ltd., on the taxable value of Rs. 10 Crores, which was paid @10%. However, the records revealed that for the value of the said services, half of services were provided prior to February 2009, when the service tax rate were 12%, according to which the appellant had failed to assess the tax of that half of value at the prevailing rate @12%, thus creating a difference and short payment to the extent of 2%. Similarly, the Service tax authorities ascertained that the Appellant did not pay service tax on “Renting of Immovable Property” provided to Adani Wilmar Ltd. and therefore, the appellant was liable to pay Service tax of Rs. 9,51,108/- under the category of “Renting of Immovable Property”. On being pointed out by the audit team, appellant immediately deposited the entire amount of service tax with interest. Based on the above, a show cause notice dtd. 12.09.2012 was issued to the appellant proposing to demand of service tax under Section 73(1) of the Finance Act amounting to (i) Rs. 10,30,000/- and interest applicable thereon amounting to Rs. 2,03,601/- under the category of „Management Consultancy Service‟ and (ii) Rs. 10,36,797/- for providing „Renting of Immovable Property Services. Since the appellant had paid the entire amount of Service tax of Rs. 10,30,000/- along with interest of Rs. 2,03,601/- under the category of „Management Consultancy Service‟ the same was proposed for appropriation against the demand and also since the appellant had paid an amount of Rs. 11,49,789/- under the head of „Renting of Immovable property‟ services , the demand amount of Rs. 10,36,797/- proposed was to be appropriated against the paid up amount of Service tax respectively. Similarly the interest under Section 75 of the Finance Act, 1994 was also proposed on the proposed demand. Penalties under Section 76,77& 78 of the Finance Act, 1994 were also proposed to be imposed. In adjudication, Ld.Additional Commissioner vide OIO dtd. 27.05.2013 confirmed the demand alongwith interest and penalties. Being aggrieved, appellant filed appeal before the Commissioner (Appeals), who vide impugned order partly allowed the appeal of appellant. He upheld the demand of differential amount of Service tax under the category of taxable services „Management Consultancy Services‟ and penalty under Section 78 of the Act confirmed by the additional Commissioner of Service tax while dropping Penalties under Section 76 and 77 of the Act by extending the benefit of Section 80(2) of the Finance Act in respect of taxable services provided under the category of „Renting of Immovable Property‟. Ld. Commissioner (Appeals) was further pleased to quash and set aside the amount of penalties imposed under Section 76,77 and 78 of the Act by additional Commissioner. Aggrieved by the impugned order present Appeals have been filed.

3. Shri Hardik Modh, Learned Advocate appearing on behalf of the appellant submits that the appellant provided services prior to February 2009 for which the invoices was raised and payment was received after February 2009. Prior to 01.03.2011, the legislature had not provided any methodology for deciding applicability of rate of Service tax in case where rate of Service tax is changed. The Legislature first time introduced the applicability of rate of service tax in case where service tax rate is changed through “Point of Taxation Rule 2011” (POT) by Notification No. 18/2011-ST dtd. 01.03.2011 w.e.f 01.03.2011. Rule 9 of POT provides that the POT rules is not in a case where the provisions of services was completed, or the invoices was issued prior to date of 01.03.2011. However Rule 4 determines the point of taxation in a case where there is change in effective rate of tax. Rule 4(1) provides that where taxable services has been provided before the change in effective rate of Service tax and invoices has been issued and payment received after change in effective rate of tax, Point of taxation shall be the date of payment or issuing of invoice, whichever is earlier is applicable in a case where service has been provided prior to change in rate of Tax. In the present case, the service was provided prior to 24.02.2009 and invoice was raised and payment was received after 24.02.2009, and therefore, Service tax as applicable after 24.02.2009 (10%) is leviable.

4. He also submits that even though Rule 9 specifically provided that the present rule of POT is not applicable in a case where service was provided and invoice was received prior to introduction of point of taxation Rules2011 , there was no specific provision during the disputed period regarding applicability of rate of service tax in case where rate of service tax is changed. Hence, intention of the legislature can be drawn from the POT Rules. He placed reliance on the case of VigaynGurukul Vs. Commissioner of Central Excise -2012(25)STR 459 (Tri. Del)

5. He further submits that department issued show cause notice on 12.09.2012 for the period prior to 24.02.2009. The issue involved is prior to 2009 therefore , the show cause notice was required to be issued on or before 25.10.2011. Since the show cause notice has been issued after 25.10.2011, the show cause notice itself is bad in law. Even though the appellant raised the issue of limitation in the appeal, Ld. Commissioner (Appeals) did not give any finding on the limitation. Burden lies upon the revenue to prove that there was suppression of facts or wilful mis-statement with intent to evade service tax. The Appellant disclosed the value of Service tax in ST-3 return filed during the disputed period. The Appellant paid service tax @10% on bonafide belief that rate of tax as applicable on date of invoice is leviable in view of decision of VigyanGurkul Vs. CCE- 2012(25)STR 459 (Tri.-Del) Supra.

6. He also argued that the appellant did not pay service tax on godown provided to AWL on rent during the period 2009-10 to 2010-11. The show cause notice for the period 2009-10 was required to be issued by 25.10.2011. Similarly for the first year of 2010-11, the show cause notice was required to be issued prior to 25.04.2011 and for the second half of the 2010-11 the show cause notice was required to be issued by 25.10.2012. In the present case, the show cause notice for the period of 2009-10 and the first half year of 2010-11 is time barred because the same has been issued after 25.04.2012.

7. He further submits that appellant did not pay service tax at the relevant time since the chargeability of Service tax on renting of immovable property was sub-judice before various court. The Hon‟ble Delhi High Court in the case of Home Solutions Retails (India) Ltd. Vs. Union of India - 2011(24)STR 129(Del) subsequently upheld the validity of levy. The appellant thus on being pointed out by the audit team immediately paid the service tax alongwith interest. Since, the matter of levy was sub-judice, the department did not allege any malafide intention on the part of the appellant. In these facts, larger period of limitation ought not to have been invoked. He placed reliance on the following judgments.

(i) JumeraPromotors& Developers Pvt. Ltd. Vs. Commissioner of Central Excise -2017(5)GSTL 266 (Tri. Del.)

(ii) RajdhaniKrishiUpajMandiSamiti Vs. Commissioner of Central Excise & S.T. -2019(24)GSTL 623(Tri.Del)

(iii) Commissioner of Central Excise & S.T. Vs. Trimurti Build Tech Pvt. Ltd. – 2007(3)GSTL 489 (Tri. All)

8. He also submits that it is settled law that where the issue involved in any case is of interpretation, the same being technical in nature, mens-rea to evade payment of duty cannot be alleged. Thus, the show cause notice issued invoking extended period of limitation is not sustainable being barred by limitation.

9. He further submits that benefit under Section 73(3) ought to have been extended. In the present case, since, the audit team pointed out in the Audit Report that the Appellant deposited the tax alongwith interest, the show cause notice ought not to have been issued. He placed reliance on the following decisions.

(i) YCH Logistics (India) Pvt. Ltd. Vs. C.S.T. -2020(43)GSTL 518 (T)

(ii) C.C.I Logistics Ltd. Vs. C.Ex. -2021(54)GSTL 27 (T)

(iii) Meroform India Pvt. Ltd. Vs. CST -2020(33)GST 200 (T)

(iv) Onwards E-Services Ltd. Vs. CST -2019(21)GSTL 167(T)

10. Per contra, Shri R. Nathan, Learned Assistant Commissioner (AR) supported the findings of Adjudicating authority.

11. We have considered the submissions made by both sides and perused the case records. We find that during the disputed period there is no clear provision in Finance Act, 1994 as to the date with reference to which rate of tax is applicable for calculating service tax. However, this lacuna was removed by Point of Taxation Rules, 2011 by Notification No. 18/2011-S.T., dated 1-3-11 which was further amended by Notification 25/2011-S.T., dated 31-3-11. However we also noticed that during the disputed period service tax is payable only when value of servicepayment is realized. In the present disputed matter the appellant raised the invoice on 30.04.2009 and payment towards the services of “Management Consultancy Services” was also received in July 2009 when rate of service tax was @10%, therefore in our view appellant had rightly paid the service tax under the category of “Management Consultancy Services‟ at 10%. The rate of tax is applicable on the date when the appellant was liable for pay Service tax to the department.

12. We also find that provisions in Rule 4(b)(ii) and Rule 9 of the new Point of Taxation Rules, 2011 as amended by Notification 25/2011-S.T., dated 30-3-2011 have the same effect. For convenience Rule 9 of the said Rules is reproduced below :-

“9. Transitional Provisions. - Nothing contained in this subrule shall be applicable,-

(i) where the provision of service is completed, or

(ii) where invoices are issued prior to the date on which these rules come into force.

Provided that services for which provision is completed on or before 30th day of June, 2011 or where the invoices are issued up to the 30th day of June, 2011, the point of taxation shall, at the option of the taxpayer, be the date on which the payment is received or made as the case may be.”

In view of above provision it is clear that the rule of POT is not applicable in a case where service was provided and invoice was issued prior to introduction of Point of Taxation Rules, 2011.

13. In view of the above discussions and analysis we find that the impugned order confirming the differential service tax demand in respect of „Management Consultancy Service” is not sustainable. Accordingly, we decide this disputed issue in favour of the Appellant.

14. We also find that Appellant contested the service tax demand related to renting of immovable property service on limitation only and we find force in arguments of appellant. Admittedly the tax liability on this particular tax entry has been a subject matter of substantial litigation. At the relevant time the chargeability of service tax on renting of immovable property was subjudice before various judicial forum. In fact, the Hon‟ble Delhi High Court in the case of Home Solutions Retail Ltd. v. Union of India -2011 (21) S.T.R. 109 (Delhi) held that the activity of the rent per se cannot be subjected to Service Tax levy, whereas the activities in relation to renting are liable to Service Tax. The decision of the Delhi High Court led to legislative changes including retrospective amendment of the concerned legal provisions in the Finance Act, 1994. In fact, for non-payment of Service Tax under this tax entry, special provision was made under Section 80(2) to waive the penalties. Considering these backgrounds, we find that the ingredients for invoking demand for extended period are not present in the present case. Accordingly, the demand raised on “Renting of Immovable Property” shall be restricted to normal period only.

15. Accordingly, the impugned order is set aside. Appeal is allowed in the above terms with consequential relief, if any, as per law.