2014 (11) TMI 499 - AT - Service Tax

Renting of Immovable Property - cum-duty value - levy of service tax on security amount - Imposition of interest and penalty - Benefit of Section 80 - Held that - Admittedly, the security deposit collected by the appellant is refundable at the time of termination of lease/rent agreement. Therefore, the said security deposit cannot form a part of service provided by the appellant. Therefore, on the said amount, service tax is not payable. Cum-duty price - As per the agreement, the service tax is payable separately by the lessee. As the appellant has not recovered service tax from the lessee, they may recover separately. Therefore, the contention of the appellant as they have not recovered the service tax from the lessee, the rent recovered by them be treated as cum-service tax is not acceptable. In these circumstances, we hold that the rent received by the appellant shall be treated as gross value of taxable service and on the said amount the appellant is required to pay service tax. Levy of penalty - On the understanding of the appellant that what amount of rent they received the same is treatable as cum-service tax, therefore, they have not paid full amount of service tax. This understanding by the appellant is not acceptable. In these circumstances, substantial benefit of Section 80(2) cannot be denied. In these circumstances, we hold that the appellant is entitled for the benefit of dropping the penalty on the appeal as per Section 80 (2) of the Finance Act, 1994 - Decided in favour of assessee.

Summary

Issues:
1. Demand of service tax on security deposit paid on Renting of Immovable Property.
2. Quantification of interest on service tax paid and penalties imposed.
3. Applicability of Section 80(2) of the Finance Act, 1994.

Issue 1: Demand of service tax on security deposit:
The appellant appealed against the order demanding service tax on security deposit paid on Renting of Immovable Property. The appellant, as the owner of the property, received security deposits and rent from lessees. The agreement specified that the lessee would bear the service tax. The authorities demanded service tax on the total amount of security deposit and rent received by the appellant. The appellant argued that service tax should not apply to the security deposit as it is refundable, and they had not collected service tax from the lessees. The tribunal held that service tax is not payable on the security deposit, but the rent received should be treated as the value of taxable service, and service tax is payable separately on the rent amount.

Issue 2: Quantification of interest and penalties:
The lower authorities did not quantify the interest on service tax paid by the appellant or the penalties imposed. The appellant pleaded for the benefit of Section 80(2) of the Finance Act, 1994, as they had paid the entire service tax amount before a specified date. The tribunal found that the appellant was entitled to the benefit of dropping the penalty under Section 80(2) since they had paid the service tax before the specified date. Therefore, no penalty was leviable on the appellant.

Issue 3: Applicability of Section 80(2) of the Finance Act, 1994:
The appellant argued that they should be given the benefit of Section 80(2) as they had paid the service tax before the specified date. The tribunal agreed that the appellant's understanding that the rent received could be treated as cum-service tax was not acceptable. However, they held that the appellant was entitled to the benefit of dropping the penalty under Section 80(2) of the Finance Act, 1994. Therefore, no penalty was leviable on the appellant.

In conclusion, the tribunal ruled that no service tax is payable on the security deposit, but the rent received should be treated as the value of taxable service, and service tax is payable separately on the rent amount. Additionally, the tribunal held that the appellant was entitled to the benefit of dropping the penalty under Section 80(2) of the Finance Act, 1994, and no penalty was leviable on the appellant.