KARBALA TRUST Vs. COMMR. OF C. EX., TRIVANDRUM

JUDGEMENT

(1.) THIS appeal arises from OIA No. 2/04 S.T. dated 17 -3 -2004. The appellant is challenging the imposition of penalty of Rs. 5,407/ - and additional penalty of Rs. 1,000/ - for non -filing of ST -3 returns. The appellants contend that they are a charitable religious organization engaged in community services. They had collected rent on leasing the auditorium for religious activities. Their contention is that the activities carried out in the auditorium was not that of Mantapam where marriages are performed. Therefore the levy of Service tax was not sustainable. They have relied on the judgment of Hindustan Steel Ltd. v. State of Orissa reported in 1978 (2) E.L.T. (J 159) (S.C.) = 1972 (83) ITR 26 in which the Apex Court has held that for mere failure to carry out any statutory obligation it should not be visited with penalty if appellants have acted under bonafide belief. The appellants contend that as the activity carried out by them was not that of mantapam hence they were under bonafide belief that they were not covered under the category of mantapam. It is stated that the auditorium was utilized only for offering prayers and not for any other activity. The Commissioner has not accepted their plea. He has upheld the levy of penalty. The appellant is 75 years old person and has prayed for a decision on merits. Learned SDR justified the imposition of penalty.

(2.) ON a careful consideration, I notice that the appellant have questioned the levy of service tax and also the levy of penalty. The auditorium was let out for purpose of NAMAZ i.e. prayers, the activity is not that of marriage as is understood, when mantapam is let out for the purpose. The appellants have already paid the service tax along with interest even before the issue of OIO. There held bonafide belief as to whether the auditorium where prayers are carried on comes within the ambit of mantapam. This question is not answered by the authorities below. The activity is fully religious in nature and does not come within the category of social or cultural activity. The appellant has challenged this issue and have questioned the levy of penalty. As this issue has not been answered by the authorities below, hence the matter is remitted back to the Original Authority for denovo consideration. However, the levy of penalty is totally unjustified in the light of the Apex Court judgment rendered in the case of Hindustan Steel Ltd., (supra). The appellants certainly held a bonafide belief that they were not covered under the category of Mantapam as the activity was not social or cultural but purely religious one.

(3.) THE appellants have challenged the correct calculation of service tax also. They contend that the show cause notice does not speak about the amount of service tax demanded and that there is no application of mind in working out the service tax. The plea taken is justified. The authorities ought to have correctly given the calculation of service tax. The question relating to the activity of letting the auditorium for prayers and the same coming within the ambit of mantapam has not been answered by the authorities and also the correct amount of service tax has not been calculated, therefore, the matter is sent back to the Original Authority to consider both the pleas. However, penalties imposed are set aside. The adjudicating authority shall follow the principles of natural justice and decide the matter expeditiously within 4 months from the date of receipt of this order.