Order Date – 05 July 2023

Parties: Commissioner, Namakkal Municipality Vs Commissioner of GST & Central Excise

Facts – 

• The Appellant, Commissioner, Namakkal Municipality, had not paid service tax, education cess, secondary and higher education cess on the “Renting of Immovable Property Service” rendered by them for the period from 1.4.2010 to 31.3.2011.
• Accordingly, a show cause notice was issued and the demand was confirmed along with interest and penalty relying on the Hon’ble High Court’s decision in Home Solutions Retail India Ltd Vs Union of India [2011 (24) STR 129 (DEL)] wherein the leviability of Service Tax on Renting of Immovable Property Services has been held constitutionally valid and the amendment giving retrospective effect from 01/06/2007 was also upheld. The appellant has paid a major portion of the duty.

Issue –

• Whether the interest and penalty can be waived? 

Order –

• The Tribunal observed that in the DO letter of the Joint Secretary (Tax Research Unit-II) dated 26/02/2010, that an amendment was made to the ‘Renting of immovable property service’ in order to overcome the earlier judgment of the Hon’ble High court of Delhi in its order dated 18.04.2009 in the case of Home Solutions Retail India Ltd. & Others vs. UOI wherein the Hon'ble Court it had struck down the levy as not being a service. This being so liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect as decreed by the Apex Court in Star India (P) Ltd.
• Further, in para 10 of the said judgment, it is stated that where the amendment expressly makes a provision for the payment of the retrospectively amended tax liability within a specified time, in such circumstance, the appellant is not entitled to pay interest if the monies are paid within the said date and that they would be liable to pay interest only after the said date.
• No provision of time has been made in the present amendment for payment of retrospectively assessed duty. Hence, the interest would be in the nature of a quasi-punishment as per the above judgment and is not payable by the appellant.