Custom, Excise & Service Tax Tribunal
Maddi Lakshmaiah And Co Ltd vs Guntur G S T on 1 April, 2026
1 Appeal No. ST/30290/2022
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 30290 of 2022
(Arising out of Order-in-Original No.GUN-EXCUS-000-COM-001-22-23-ST dated
03.06.2022 passed by Pr. Commissioner of Central Tax, Guntur)
M/s Maddi Lakshmaiah & .. APPELLANT
Company Ltd.,
D.No.5-166,
G.T. Road,
Ganapavaram,
Chillkaluripeta,
Guntur District,
Andhra Pradesh - 522 619.
VERSUS
Pr. Commissioner of Central Tax .. RESPONDENT
Guntur - GST
GST Bhavan,
Central Revenues Building,
Kannavari Thota,
Guntur,
Andhra Pradesh - 522 004.
APPEARANCE:
Shri C.S. Srinivas, Consultant for the Appellant.
Shri V.R. Pavan Kumar, Authorized Representative for the Respondent.
CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL)
HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL)
FINAL ORDER No. A/30171/2026
Date of Hearing: 25.02.2026
Date of Decision: 01.04.2026
[ORDER PER: ANGAD PRASAD]
M/s Maddi Lakshmaiah and Company Ltd., Chilkaluripeta, Guntur
(hereinafter referred to as appellant) are in appeal against the Order-in-
Original No.GUN-EXCUS-000-COM-001-22-23-ST dated 03.06.2022,
whereby, the penalties under Section 76, 77 and 78 of the Finance Act, 1994
were imposed upon the appellant in respect of Service Tax liability relating to
Renting of Immovable Property Service (RIPS) under Section 65 (105)
(zzzz) and Goods Transport Agency (GTA) Service. The appellant had, inter
2 Appeal No. ST/30290/2022
alia, received certain rental income during the period June 2007 to March
2011, from renting of premises situated in Guntur District, which
Department felt was leviable to Service Tax.
2. Learned Counsel for the appellant submits that at the relevant time,
the levy of Service Tax on renting of immovable property itself became the
subject matter of vide spread litigation across the country. The Hon'ble Delhi
High Court in M/s Home Solutions Retail India Ltd., Vs Union of India
repaired in 2010 (19) STR 3 9 (Del) held that mere renting of immovable
property could not regarded as a taxable services. Subsequently, the
Parliament amended the definition of taxable service under Section 65 (1050
(zzzz)) of the Finance Act, 1994, through the Finance Act, 2010, giving the
levy retrospective effect from 01.06.2007. The appellant themselves had
also challenged the levy before the Jurisdictional High Court by filing writ
petition no.15238 of 2010, wherein, interim stay was granted against the
collection of Service Tax. However, subsequently the appellant with-drew
writ petition and discharged the entire Service Tax liability amounting to Rs.
5,41,54,258/- along with applicable interest.
3. Learned Counsel for the appellant submits that despite the above
payment, the Department went ahead and issued Show Cause Notice dated
20.04.2012, proposing confirmation of demand and imposition of penalties.
The matter earlier reached this Tribunal which vide Final Order No. A/30302
- 30350/2017 dated 22.02.2017, which remanded the matter for
reconsideration, mainly on the issue of penalties.
4. Pursuant to the remand the Adjudicating Authority passed the
impugned order dated 03.06.2022 imposing penalties under Section 76, 77
and 78 of the Finance Act, and not deciding on the issue of demand as said
3 Appeal No. ST/30290/2022
in view of admitted position of leviability of Service Tax on said service. The
order passed by the Learned Adjudicating Officer especially operative part as
follow:
ORDER
(i) As the proceedings under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in respect of Show Cause Notice dated 21.04.2010 issued in C.No.V/ST/15/07/2010-Adj and Show Cause Notice 20.04.2012 issued in C.No.V/ST/15/03/2012-Adj (Order-in- Original No.112/2012-ST dated 21.12.2012) pertain to Goods Transport Agency Service were initiated and concluded by way of the discharge Certificate in Form No.SVLDRS-4 No.L280820SV400009 dated 28.08.2020 issued by the Designated Committee, Guntur Central GST Commissionerate, the further adjudication proceedings in respect of Goods Transport Agency Service initiated in the Show Cause Notices dated 21.04.2010 and 20.04.2012, are dropped. Hence, I drop penalties under Sections 76, 77 and 78 of the Finance Act, 1994 in respect of Goods Transport Agency Service.
(ii) I impose a penalty of Rs. 5,68,95,322/- (Five Crore Sixty Eight Lakh Ninety Five Thousand Three Hundred and Twenty Two only) under Section 78 of the Finance Act, 1994 for contravention of provisions of Section 73 of the Finance Act, 1944.
(iii) I impose a penalty of Rs. 200/- per day or 2 % of such Tax per month whichever is higher starting with the first day after the due date till the date of actual payment of the outstanding amount of Service Tax mentioned at as above, up to 10.05.2008 under Section 76 of the Finance Act, 1994 for contravention of Section 68 of the Finance Act, 1994. However, the penalty imposed under this Section shall not exceed the amount of Service Tax Rs. 5,68,95,322/-.
(iv) I impose a penalty of Rs. 1,000/- (Rupees One Thousand only) under Section 77 of the Finance Act, 1994 for the delay in obtaining Service Tax registration.
(v) I impose a penalty of Rs. 1,000/- (Rupees One Thousand only) under Section 77 of the Finance Act, 1994 for non-filing of ST-3 Returns within the prescribed dates, for each return.
5. Aggrieved by the above order the appellant has filed this appeal before the Tribunal.
6. Learned Counsel for the appellant submits that the entire Service Tax along with applicable interest has been paid during 28.03.2008 to 03.09.2010. Learned Counsel for the appellant submits that the dispute 4 Appeal No. ST/30290/2022 arose only due to the retrospective amendment introduced by the Finance Act, 2010 which expanded the scope of renting of immovable property service with retrospective effect from 01.06.2007. Learned Counsel for the appellant has placed reliance on the following decisions:
i) Sethi Tools Pvt Ltd., Vs Commissioner of Central Excise, Customs and Service Tax - Vadodara - II [2015 (9) TMI 633 - CESTAT Ahmedabad]
ii) Varun Motors Vs Commissioner of Customs & Central Excise, Visakhapatnam - GST [2018(110 TMI 1523 - CESTAT Hyderabad]
iii) Haresh Kishor Vs the Commissioner of G.S.T. & Central Excise, Chennai North Commissionerate [2019 (1) TMI 1310 - CESTAT Hyderabad]
iv) Chandra Container Manufacturers, Medak District Vs The Commissioner C.C.E&ST, Hyderabad-I [2016 (6) TMI 579 - Tri-Hyd]
7. Learned Counsel for the appellant further submits that penalty cannot be imposed in cases where the levy itself arises due to retrospective amendment. Learned Counsel for the appellant relied on the following decisions:
i) Star India Pvt Ltd., Vs Commissioner of Central Excise, Mumbai & Goa [2006 910 S.T.R. 73 (S.C.)]
ii) D.S. Narayana & Company Pvt Ltd., Vs C.C.&C.E., Visakhapatnam-II, [2017 (4) G.S.T.L. 20 (Tri-Hyd)]
iii) Devon Plantations and Industries Ltd., Vs Commissioner of Central Excise, Mysore, [2025 (10) TMI 1269 - CESTAT Bangalore]
8. Learned Counsel for the appellant submits that penalty under Section 78 is not sustainable. Since, there was no suppression or will full statement.
In this regard Learned Counsel for the appellant placed reliance on the following judgment.
i) Nizam Sugar Factory Vs Collector of C.E. [2006 (40 TMI 127-SC]
ii) ECE Industries Ltd., Vs Commissioner of Central Excise, New Delhi [2003 (3) TMI 136-Supreme Court] 5 Appeal No. ST/30290/2022
9. Learned Authorized Representative (AR) for the Department reiterates the findings recorded in the impugned order and further submits that since, the demand of Service Tax was confirmed and extended period invoked, the Adjudicating Authority has rightly imposed penalties.
10. Heard both sides and perused the records.
11. We have carefully considered the rival submissions and perused the records. The short question which arises for consideration is whether penalties imposed under Section 76, 77 and 78 of the Finance Act, 1994 are sustainable in the facts and circumstances of the case.
12. By Final Order No. A/30302 - 30350/2017 dated 22.02.2017, this Tribunal had decided that there was no infirmity in demands of Service Tax on Renting of Immovable Property Service and remanded the matter for denovo consideration only on the issue of imposition of penalties thereon. The appellant have not contested the payment of Service Tax on Renting of Immovable Property Services, as such, and are contesting only imposition of penalty under Section 76, 77 and 78 of the Finance Act, 1994.
13. The Hon'ble Delhi High Court in the case of M/s Home Solutions Retails India Ltd., supra, held that renting of immovable property per se cannot be treated as a taxable service, however, the Government by way of an amendment in the Finance Act, 2010, imposed the levy retrospectively with effect from 01.06.2007. Thus, the dispute during the relevant period was essentially of interpretational nature and arose due to retrospective amendment and there were divergent views and judgments on the issue by different Tribunals and Courts.
14. The Hon'ble Supreme Court in Star India Pvt Ltd., Vs Commissioner of Central Excise, supra, held that penalty ordinarily is not to be imposed where 6 Appeal No. ST/30290/2022 the liability arise due to retrospective amendment of law. The relevant para of above judgment as thus:
"7. In any event, it is clear from the language of the validation clause, as quoted by us earlier, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well established that while it is permissible for the legislature to retrospectively legislate, such retrospectively is normally not permissible to create an offence retrospectively. There were clearly judgments, decrees or orders of courts and Tribunals or other authorities, which required to be neutralised by the Validation Clause. We can only assume that the judgments, decree or orders etc. had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the Validation Section which says that no act or acts on the part of any person shall be punishable as an offence which would have been so punishable if the Section had not come into force."
15. We also note that the issue was under litigation before various High Courts and the Hon'ble Supreme Court and the levy was reintroduced by way of retrospective amendment in the Finance Act, 2010.
16. Learned Counsel for the appellant submits that Section 80(2) of the Finance Act, 1994 introduced through the Finance Act, 2012 specifically, grants immunity from penalties in respect of this service where Service Tax along with interest was paid within the stipulated period. Since, the appellant had discharged the entire tax liability along with interest, before the said date imposition of penalty is contrary to the aforesaid statutory provision. He further contends that even if it is presumed that their case is strictly not falling under Section 80(2), as the Department is contending that the entire leviability was not discharging, they are still eligible for waiver of penalty under Section 80(1), as it existed during material time.
17. Section 80(2) of the Finance Act, 1994 provides immunity from penalty were Service Tax along with interest has been paid within the stipulated 7 Appeal No. ST/30290/2022 period after retrospective amendment Section 80(2) of the Finance provides as follows:
"80(2) Notwithstanding anything contained in the provisions of Section 76 or Section 77 or Section 78, no penalty shall be imposable for failure to pay Service Tax payable, as on the 6th day of March, 2012, on the taxable service referred to in sub-clause (zzzz) of clause (1050 of Section 65, subject to the condition that the amount of Service Tax along with interest is paid in full within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President."
18. In the present case it has been disputed by the Learned AR that the appellant has discharged the entire Service Tax liability along with interest. The Co-ordinate Bench, Ahmedabad in the case of Sethi Tools Pvt Ltd., supra, held that "4.1 As per the above provision an assessee who paid the Service Tax on 'Renting of Immovable Property' before introduction of Sec 80(2) cannot be put at a disadvantage vis-vis a tax payer who delayed and paid tax on the same service after 06.03.2012. Further, there was a dispute on the levy of Service Tax on 'Renting of Immovable Property' and the same was brought to the notice of the department by the appellant through a letter dated 12.06.2008. Accordingly, it has to be held that appellant had a reasonable cause for non-payment of tax during the relevant period. For such an eventuality waiver from penalties was always available under Section 80 of the Finance Act, 1994 even before the introduction of Section 80(2)."
19. Similar views have been taken in Varun Motors, supra and Haresh Kishor, supra. The dispute is on account of the fact that though they have paid the duty to the extent required to be paid by them after deducting certain amount for the period when the Service Tax was not leviable or to the extent paid through Cenvat Credit or in terms of certain exemptions. Be the case as may, fact remains they have not discharged full Service Tax and interest, as such, and hence cannot be strictly covered within the provisions of Section 80(2) of Finance Act, 1994. Their view that they had paid the entire demand and interest may be correct but that could have been decided 8 Appeal No. ST/30290/2022 by the Adjudicating Authority after examining their claim in the light of their exemptions. However, as the demand of duty under RIPS has attend finality in terms of earlier Tribunal order dated 22.02.2017, supra, and dismissal of appeal by Hon'ble Supreme Court on appeal by Revenue against said order. Further the demand, as such, has also not been contested or is subject matter of impugned order, therefore we refrain from deciding the issue of demand of Service Tax or quantification thereof, under the category of RIPS.
20. Therefore, the issue to be decided is whether the penalty is imposable under Section 76, 77 and 78 of the Finance Act, 1994, in the facts of the case or otherwise. The appellant's are not disputing the demand of Service Tax on the RIPS i.e., 65 (105)(zzzz) and they are only in appeal to the extent of imposition of penalty. They are also not contesting penalty in respect of GTA Service. The total demand confirmed was Rs. 5,68,95,3221/- in respect of RIPS and as against which, an amount of Rs. 5,26,46,345/- has already been appropriated. It is also a fact that an interest of Rs. 1,83,02,007/- has been paid in respect of demand for RIPS and duly appropriated. It is also to be noted that there is no dispute on demand under the category of GTA, which has already been settled through SVLDRS 2019, as discussed, supra.
21. The taxability of the rental income under the category of RIPS was under prolonged litigation. This service was introduced with effect from 01.06.2007, which was challenged before different Tribunal and Courts and the Hon'ble Delhi High Court in the case of M/s Home Solutions Retail India Ltd., and others [2009 (237) E.L.T. 209 (Del)], vide order dated 18.04.2009 held the levy of Service Tax on Renting of Immovable Property as unconstitutional. However, Government amended the definition on 01.07.2010 retrospectively with effect from 01.06.2007. Therefore, during 9 Appeal No. ST/30290/2022 the relevant period it cannot be said that there was any deliberate intention on the part of appellant not to pay Service Tax on RIPS in view of contradictory views and judgments. We also find that the appellant had paid substantive amount before the issue of Show Cause Notice, though there is some dispute as regards the full payment as the appellant has claimed that they were not required to pay the entire amount, as demanded under RIPS, once following factors are taken into consideration:
a) Cenvat Credit of Rs. 15,07,913/- which cannot be denied under Rule 9 (bb) as the said provision came which effects from 01.04.2011 whereas, the appellant had availed the credit during the 2008-09 to 2010-11.
(b), the demand of Rs. 30,15,438/- was made for the period April, 2007 and May, 2007, which is even before the levy of Service Tax itself w.e.....f 01.06.2007, as supported by CA certificate.
(c) No Service Tax is leviable on the amount received from Andhra Pradesh State Housing Corporation, Kakinada, since, the premises was rented for storage of rice and exempted in terms of Board Circular F.No. B-II/1/2002- TRU(III) dated 01.08.2002.
Thus, if these were to be considered and eligible, they would have been eligible under Section 80(2) itself. However, notwithstanding this, their eligibility in terms of section 80(1) / Section 80, as existed during material time also merits consideration.
22. We find in the facts of the case penalty under Section 78 itself is not sustainable as the issue is that of interpretation and their liability under the disputed service arose only due to retrospective amendment and in terms of decision of the Hon'ble Supreme Court in the case of Retailers Associates of India Vs Union of India. Thus, during the intervening period the non- payment of Service Tax on RIPS cannot be said to be with any malafide intent or deliberate. Further the fact that payment of entire Service Tax, barring, a relatively small disputed amount along with interest by the appellant substantial their claim that the non-payment to that extent was 10 Appeal No. ST/30290/2022 not with any deliberate intent to evade payment of Service Tax. We also note that there is no other tangible evidence on record in support that non- payment was done deliberately or with an intent to evade. Thus, in the facts of the case penalty under Section 78 cannot be imposed.
23. In so far as penalty under Section 76 & 77 are concerned, we find force in the submissions that even if on a strict construction it is held that they are not covered under Section 80(2) of Finance Act, they are still eligible for waiver from penalty under Section 76, 77 and 78 in terms of Section 80(1) as there was reasonable cause for not paying the tax during the relevant time. We also find force in the case laws relied by them in support that in the case of retrospective levy of tax on RIPS, penalty are not leviable.
24. We find that Hon'ble High Court of Karnataka, in the case of Commissioner of Service Tax, Bangalore Vs Motor World, supra, inter alia, examined the provisions of Section 80, as it existed during the material time. Section 80 provided that notwithstanding the provision under Section 76, 77 and 78 or Section 79, no penalty shall be imposable on the assessee for any failure refer to in said provisions, if the assessee proves that there were reasonable grounds and reasons for the said failure. In the facts of the case, we find that there was reasonable ground for non-payment of Service Tax during the material time and therefore, the penalty under Section 76, 77 & 78 cannot be imposed in terms of provision under Section 80, as it existed during the material time.
25. In view of the discussions, supra, we find that in the facts of the case penalty under Section 78 cannot be sustained as such as, no ingredients required for invoking Section 78 are present. Moreover, while on strict 11 Appeal No. ST/30290/2022 construction, Section 80(2) may not be applicable, as apparently the appellant has not fulfilled the condition of making full payment along with interest before due date however, in terms of provision under Section 80(1) itself, where there was reasonable cause for non-payment of Service Tax during the material time, no penalty can be imposed under Section 76, 77 and 78. Therefore, the entire penalty imposed under Section 78,76 and 77 are liable to be set aside in terms of provisions of under Section 80 / 80(1) as well as on the the ground that Section 78 cannot be invoked in the given factual matrix. Therefore, to that extent the impugned order is liable to be set aside and in accordingly set aside to that extent.
26. To sum up following is ordered:
a) Penalty under Section 78 is not sustainable in the facts of the case.
b) Penalty under Section 76, 77 and 78 is not imposable in terms of Section 80 in the facts of the case.
The impugned order dated 03.06.2022 is modified to the extent above and the penalties under Section 76, 77 and 78 are set aside.
27. The appeal filed by the appellant is disposed off accordingly.
(Pronounced in the open court on_01.04.2026_) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Shirisha