2014 (9) TMI 781 - AT - Service Tax

Commercial or industrial construction service - site formation service - Imposition of penalty - Held that - As regards the commercial or industrial construction service and the site formation service, the applicant does not dispute the classification or the computation of demand and therefore, the appellant is liable to pay the entire service tax demand confirmed along with interest thereon and only the amounts actually paid by them and appropriated has to be excluded for the purposes of recovery. Therefore, we direct the appellant to make pre-deposit of entire service tax confirmed in respect of Commercial or Industrial Construction Service and Site Formation and Clearance Service along with interest thereon (excluding the amount already deposited). Renting of immovable property - Held that - Only if vacant land exists as it is without any building, the exclusion clause would apply. The fact that the area of the land appurtenant to the building being more than the area of the building would not make any difference. The Ld. Adjudicating authority has dealt with this matter in detail in paras 88 to 90 of the impugned order and we do not find any fault in the reasoning adopted by the adjudicating authority. Therefore, the demand of service tax in respect of the land and building rented to M/s. Reliance Industries Ltd. is prima facie, sustainable in law. As regards the land and building rented out to M/s. Avinash Automobiles Pvt. Ltd., we note that the premises leased out consisted of a factory building and vacant land with a common compound wall and security gate. The appellant has also not been able to lead any evidence to the contrary nor did they furnish any evidence of the alleged construction on the vacant land subsequent to the lease agreement. Therefore, the Ld. adjudicating authority was correct in concluding that the consideration received for both the land and building would be leviable to service tax under the category of Renting of Immovable Property Service . The law was also respectively amended by the Finance Act, 2010 deeming renting of immovable property as a taxable service since 1-6-2007 which was also upheld by the Hon ble High Court of Delhi in the above decision. In view of these judicial pronouncements, there is no doubt that the activity undertaken by the appellant is a taxable service and has always been so with effect from 1-6-2007. Further, in the Finance Act, 2012, a provision was made for waiver of penalty in case a service provider discharged the service tax liability along with interest in respect of renting of immovable property service within a stipulated time-limit. But, the appellant did not exercise their option for availing this facility. Having failed to avail of the opportunity, the contention for waiver of penalty is not acceptable. - Decided against assessee.

Summary

Issues:
1. Service tax demand under different categories.
2. Dispute regarding service tax on "Renting of Immovable Property Service".
3. Evidence requirement for subsequent construction.
4. Interpretation of the definition of "immovable property".
5. Applicability of penalties and waiver provisions.

Analysis:
1. The appellant faced service tax demands under various categories, including "Renting of Immovable Property Service", "Site Formation Service", and "Commercial or Industrial Construction Service". The appellant did not dispute the demands for the latter two categories but contested the demand under "Renting of Immovable Property Service".

2. Regarding the demand for "Renting of Immovable Property Service", the appellant disputed the tax liability on vacant land leased to different entities. The appellant argued that certain land was not liable to service tax as it was separate from the buildings and fell under the exclusion clause of the relevant tax provisions. The adjudicating authority found the demand sustainable, emphasizing that land appurtenant to buildings constitutes immovable property, making the demand prima facie valid.

3. The Revenue contended that evidence for subsequent construction on leased land was lacking, justifying the confirmation of service tax demands. The appellant failed to provide evidence to counter this claim, leading to the conclusion that the consideration received for both land and building rentals was subject to service tax.

4. The interpretation of the definition of "immovable property" was crucial in determining the tax liability. The Tribunal analyzed the relevant provisions and explanations to establish that land appurtenant to buildings qualifies as immovable property, irrespective of the size difference between the land and the building. This interpretation supported the sustainment of the service tax demand on the leased properties.

5. The appellant's plea for penalty waiver was rejected due to their failure to discharge the service tax liability despite judicial pronouncements deeming renting of immovable property a taxable service since 1-6-2007. The Tribunal directed the appellant to make a pre-deposit of the entire service tax liability confirmed, along with interest and a portion of the penalty, within a specified timeframe, failing which the appeal would be dismissed.

In conclusion, the Tribunal upheld the service tax demands for certain categories, emphasizing the inclusion of land appurtenant to buildings as immovable property. The appellant was directed to comply with the pre-deposit requirements to avoid dismissal of the appeal.