2013 (11) TMI 868 - AT - Service Tax

Stay application - Renting of Immovable Property Service - Demand of service tax - Held that - amount collected by the applicant on renting is a taxable service and they are paying tax. It is a security deposit which is returned after the completion of the tenure agreement. We also notice that the Board in the Service Tax Education Guidelines clarified that refundable deposit is not in the nature of service and hence do not represent the consideration of service tax. In view of that, we find the applicant has made out a prima facie case for waiver of pre-deposit of entire amount of dues. Accordingly, we grant waiver of pre-deposit of service tax and penalty along with interest and stay its recovery during the pendency of the appeal - Stay granted.

Summary

Issues:
1. Taxability of security deposit collected under Renting of Immovable Property Service.

Analysis:
The case involved a dispute regarding the taxability of a security deposit collected by the applicant under a lease agreement for Renting of Immovable Property Service. The original authority confirmed the demand of tax along with interest and penalty, which was upheld by the Commissioner (Appeals). The applicant argued that the security deposit was refundable at the completion of the lease tenure without any interest, and therefore should not be considered as an additional consideration for the taxable service.

The learned counsel highlighted the lease agreement, emphasizing that the security deposit was meant to be returned without any interest, indicating it was not part of the consideration for the taxable service. The applicant contended that the amount collected was towards renting of immovable property and not a consideration for service tax. The applicant was already paying tax on the taxable service provided. The Tribunal noted that the refundable deposit, as clarified in the 'Service Tax Education Guidelines' by the Board, was not in the nature of service and did not represent consideration for service tax.

Based on the arguments presented and considering the nature of the security deposit, the Tribunal found that the applicant had made a prima facie case for waiver of pre-deposit of the entire amount of dues. Consequently, the Tribunal granted a waiver of pre-deposit of service tax, penalty, and interest, and stayed the recovery of the same during the pendency of the appeal. The stay application was allowed, providing relief to the applicant in the matter of taxability of the security deposit collected under Renting of Immovable Property Service.