2011 (10) TMI 505 - AT - Service Tax

Waiver of pre-deposit - Time limitation - royalty as renting of immovable property - MOU dated 1.2.2002 - held that - party was admittedly enjoying the benefit of renting of immovable property. - That period is after 1.6.2007 and therefore for the present purpose we would consider renting of immovable property service having been provided by the appellant to the second party under the aforesaid MoU. - We would also consider the so-called royalty as rent collected by the appellant from the other party. These parameters appear to constitute renting of immovable property service rendered by the appellant to the other party during the period for which consideration was collected by the appellant. On merits therefore the appellant has no prima facie case. - considerting the issue of extended period of limitation pre deposited ordered for demand within normal period of limitation.

Issues:
1. Waiver of pre-deposit and stay of recovery of service tax and penalties.
2. Taxability of renting of immovable property under the Finance Act 1994.
3. Interpretation of the taxable event concerning the collection of consideration.
4. Application of Section 67 of the Finance Act 1994.
5. Time-bar defense against the demand of service tax.

Analysis:
1. The appellant sought waiver of pre-deposit and stay of recovery regarding the service tax and penalties determined by the Commissioner for the period from June 2007 to March 2009. The demand was related to the renting of immovable property and the collection of "royalty" or "rent" from a commercial activity conducted by another party under a Memorandum of Understanding (MoU). The Commissioner confirmed the demand and imposed penalties on the appellant.

2. The appellant argued that renting of immovable property was not a taxable service when the MoU was signed, emphasizing that the taxable event occurred in February 2002, before the introduction of the new levy in June 2007. The appellant relied on previous Tribunal decisions to support their claim and drew parallels between the cases involving hire purchase contracts and the MoU in question. Additionally, the appellant pleaded time-bar against the demand.

3. The Tribunal considered the argument regarding the taxable event and found that the MoU, in force since February 2002, continued during the period when royalty was collected from the other party, who benefited from renting the immovable property. As this period was after the introduction of the new levy in June 2007, the Tribunal viewed the collection of royalty as rent for renting of immovable property service provided by the appellant. Consequently, the appellant was deemed to have no prima facie case.

4. The Revenue opposed the plea for waiver and stay, referring to Section 67(3) of the Finance Act 1994 to support their position. However, the Tribunal did not accept the argument based on the taxable event and upheld the Commissioner's findings, considering the service provided by the appellant as renting of immovable property during the relevant period.

5. The appellant claimed that nearly half of the demand was time-barred, while the remaining amount for the normal period totaled over Rs. 34,00,000. The Tribunal directed the appellant to pre-deposit the specified amount within six weeks, emphasizing the absence of a plea of financial hardships and setting a compliance deadline.

This detailed analysis of the judgment addresses the issues raised by the appellant and the Revenue, focusing on the interpretation of the taxable event, the applicability of the Finance Act 1994, and the defense against the demand of service tax.

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