2017 (5) TMI 396 - AT - Service Tax

Renting of Immovable property service - appellant had rented out housing quarters and other premises on rent to its contractors other persons, but did not pay the service tax under the taxable category of Renting of Immovable property service - N/N. 6/2005 ST, dated 01.03.2005 - Held that - Renting of premises for residential purposes is not included within the scope and preview of such taxable service, for the reason that such renting is not in connection with business or commerce - However, a deeming fiction has been created in the explanation-2 appended to the said definition, providing that use of immovable property partly for business or commerce and partly for residential or any other purposes should be construed as immovable property for use in course or furtherance of business or commerce - the matter should go back to the original authority for passing the reasoned and speaking order on the basis of documents to be produced by appellant - appeal allowed by way of remand.

Summary

Issues:
Service tax liability on renting of immovable property for residential and commercial purposes; Eligibility for threshold exemption under Notification dated 01.03.2005.

Analysis:
The case involves an appeal against an order passed by the Commissioner (Appeals), Central Excise, Jaipur-II, regarding the service tax liability of the appellant for renting out housing quarters and other premises. The appellant, engaged in the manufacture of Lead Zink & Bulk concentrate, was alleged to have rented out premises without paying service tax under the taxable category of Renting of Immovable property service. The Department initiated proceedings, and the demand was confirmed, denying the threshold exemption under Notification No. 6/2005 - ST. The appellant contended that renting housing quarters to contractors for residence should be outside the taxable service scope. The appellant also argued for eligibility for the threshold exemption and disputed the application of Explanation-2 to Section 65(105)(zzzz) of the Finance Act, 1994.

The Tribunal noted that renting immovable property for business or commerce is a taxable service, but renting for residential purposes is excluded unless used partly for business purposes. The Tribunal found that the authorities did not consider the appellant's arguments regarding the location of housing quarters and other premises. The confirmation of service tax demand was based on Explanation-2, disregarding evidence of separate locations. Additionally, the appellant's argument on the exclusion of service tax paid on GTA Services for threshold exemption computation was not addressed by the authorities.

The Tribunal concluded that the matter should be remanded to the original authority for a detailed adjudication based on the evidence to be produced by the appellant. The impugned order was set aside, and the appeal was disposed of accordingly, emphasizing the need for a reasoned and speaking order in light of the appellant's submissions.