2017 (4) TMI 1225 - AT - Service Tax

Renting of immovable property service - non-payment of service tax by appellant - demand of duty with interest and penalty - Held that - the services provided as per the contract fall under the taxable category of renting of immovable property on which service tax is leviable - in view of the fact that there were divergent views with regard to the leviability of the service tax on renting of immovable property the benefit of Section 80 ibid can be extended in this case for non-imposition of penalty u/s 76 77 and 78 of the FA - penalty set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Whether service tax is leviable on the services provided by the appellant under a composite contract.
2. Whether the services provided by the appellant fall under the taxable category of "renting of immovable property" for the purpose of service tax.

Analysis:

1. The issue before the Tribunal was whether service tax could be levied on the services provided by the appellant under a composite contract. The appellant argued that the contract with M/s. Marudhar Yarn Pvt. Ltd. was not solely for renting the property but also included providing employment to the employees under the BIFR. The Revenue contended that the compensation received by the appellant was for allowing the use of land, structure, plant, and machinery, falling under the taxable service of "renting of immovable property." The Tribunal examined the terms of the contract and found that the services provided did indeed fall under the category of "renting of immovable property," making them liable for service tax under Section 65(82) of the Finance Act, 1994.

2. The Tribunal considered the findings of the ld. Commissioner (Appeals) who had detailed that the property rented out, including the factory, office, plant, and machinery, fell within the definition of "renting of immovable property" as per Section 65(90a) of the Act. The Commissioner had noted that the contract did not involve the removal of labor from the factory and that the rent received was for the immovable property and tangible goods. After perusing the contract, the Tribunal concurred with the Commissioner's conclusion that the services provided by the appellant were indeed covered under the taxable category of "renting of immovable property." However, due to divergent views on the levy of service tax in such cases, the Tribunal decided to extend the benefit of Section 80 for non-imposition of penalties under various sections of the Finance Act, setting aside the penalty imposed by the Commissioner.

In conclusion, the Tribunal partially allowed the appeal by setting aside the penalty imposed, considering the unique circumstances of the case and the differing interpretations regarding the levy of service tax on renting of immovable property.