2013 (12) TMI 1226 - AT - Service Tax

Demand of service tax - Banking and other financial services - Held that - in the show-cause notice the amount of Rs.8,04,83,022/- has been taken into consideration as lease rent earned by the appellant whereas in the impugned order the adjudicating authority has taken into consideration the lease agreement with M/s JBF Industries Ltd., for considering the amount as Rs. 3.50 Crore. The adjudicating authority confirmed the demand after taken into consideration the amount mentioned in the show-cause notice and there is no discussion in the impugned order in respect of remaining demand. In view of this we find that the matter requires reconsideration by the adjudicating authority. Therefore the impugned order is set aside and the matter is remanded to the adjudicating authority for denovo consideration - Decided in favour of assessee.

Issues:
1. Confirmation of demand for banking and financial services under Section 65(12) of the Finance Act, 1994.
2. Interpretation of lease agreements and rental income.
3. Consideration of lease rent and immovable property renting.
4. Relevance of memorandum of association in determining business activities.
5. Discrepancy in the consideration of lease rent amount in the show-cause notice and impugned order.

Analysis:
1. The appellant contested the demand of Rs.76,41,245 confirmed by the Commissioner of Service Tax, Mumbai, arguing that they are a manufacturing unit and not involved in banking or financial services. The appellant leased equipment to M/s. JBF Industries Ltd. and claimed that the demand was based on misinterpretation of lease income. The Tribunal found that the matter required reconsideration as the adjudicating authority did not adequately address the appellant's contentions. The impugned order was set aside, and the case was remanded for fresh consideration, providing the appellant an opportunity to present their case.

2. The Revenue relied on the memorandum of association of the appellant, highlighting the business activities related to leasing and hire purchase. However, the Tribunal observed discrepancies in the consideration of lease rent amount between the show-cause notice and the impugned order. The adjudicating authority did not provide a detailed discussion on the remaining demand, leading to the conclusion that a fresh review was necessary to address the issues raised by the appellant. The appeal was disposed of by remand to ensure a fair hearing and proper consideration of all relevant factors.

3. The appellant's argument regarding the majority portion of the lease rent being related to immovable property renting was not adequately addressed by the adjudicating authority. Despite the appellant's explanations during the personal hearing and written submissions, the authority did not consider this aspect in the final decision. The Tribunal emphasized the need for a comprehensive review to ensure that all aspects of the lease agreements and rental income, including immovable property renting, were appropriately evaluated to determine the legitimacy of the demand for banking and financial services.

4. The Tribunal's decision to remand the case for denovo consideration highlighted the importance of a thorough examination of the lease agreements and rental income to establish the nature of the appellant's business activities accurately. By setting aside the impugned order and providing the appellant with an opportunity for a fair hearing, the Tribunal aimed to address the discrepancies and ensure a just and well-informed decision based on a comprehensive analysis of all relevant factors.

5. In conclusion, the judgment by the Appellate Tribunal CESTAT Mumbai reflected a commitment to procedural fairness and thorough examination of the issues raised by the appellant regarding the demand for banking and financial services. The remand for fresh consideration underscored the importance of addressing all aspects of the case, including the interpretation of lease agreements, rental income, and the relevance of the memorandum of association in determining the nature of the appellant's business activities.

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