2017 (5) TMI 1252 - AT - Service Tax

Renting of immovable property service - liability of tax - Whether appellant are liable to pay service tax on the receipts from United Breweries Ltd.; to whom they have given and/or leased exclusive usage of the facilities for manufacturing of beer? - Demand of service tax on reimbursement of expenses towards wages etc. Held that - so far the fixed lease rent of ₹ 1 Crore per annum received by the appellant, the same is not taxable towards Renting of immovable property service as there is no renting out of land and building along with its fixtures. The appellant have only let out plant and machinery and the manufacturing facility, which does not qualify under the definition of Renting of immovable property service . Reimbursement of expenses - Appellant will be liable to service tax for the reimbursement made by UBL under clause 70 of the agreement, under Business Support Service with effect from 01/05/2011 - the extended period of limitation is not invokable as the transaction has been properly documented and/or recorded in the books of accounts. Matter remanded back to the Adjudicating Authority for the limited purpose of re-calculation of demand under Support Service of Business or Commerce for the period with effect from 01/05/2011 - appeal allowed by way of remand.

Issues Involved:
1. Liability to pay service tax on receipts from United Breweries Ltd. (UBL) for leasing manufacturing facilities.
2. Classification of services under "Renting of immovable property service" or "Business Support Service."
3. Applicability of the extended period of limitation and penalties.

Detailed Analysis:

1. Liability to Pay Service Tax on Receipts from UBL for Leasing Manufacturing Facilities:
The core issue revolves around whether the appellant manufacturer is liable to pay service tax on the receipts from UBL for the exclusive usage of manufacturing facilities for beer. The agreement between the appellant and UBL detailed various responsibilities, including providing the manufacturing unit, plant, machinery, and other infrastructure, while UBL managed the manufacturing process. The revenue contended that these services fall under "Support Services of Business or Commerce" and "Renting of immovable property service," thereby attracting service tax.

2. Classification of Services:
The adjudicating authority confirmed the demand for service tax under the "Renting of immovable property service," citing the statutory definitions under Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994. The appellant argued that the provided facilities, including plant and machinery, do not fall under the definition of immovable property. The Tribunal referenced the Bombay High Court ruling in Commissioner of Central Excise & Service Tax, Kolhapur Versus Karan Agencies, which held that leasing out plant and machinery without land and building does not qualify as "Renting of immovable property service." Consequently, the Tribunal concluded that the fixed lease rent of ?1 Crore per annum received by the appellant is not taxable under this category.

3. Applicability of Service Tax on Reimbursements:
The appellant received reimbursements from UBL for various expenses, including wages, insurance, and maintenance. The revenue classified these reimbursements under "Business Support Service." The Tribunal noted that these services became taxable under "Support Service of Business or Commerce" from 01/05/2011. Therefore, the appellant is liable to pay service tax on reimbursements received under clause 70 of the agreement from this date.

4. Extended Period of Limitation and Penalties:
The Tribunal found that the extended period of limitation is not applicable as the transactions were properly documented and recorded in the books of accounts. Additionally, the matter involved a dispute of classification, which negates the invocation of the extended period. Consequently, penalties imposed under Sections 77(1)(a), 77(1)(b), and 78 of the Finance Act, 1994, were set aside.

Conclusion:
The appeal was allowed with consequential benefits to the appellant. The Tribunal remanded the matter back to the Adjudicating Authority for recalculating the demand under "Support Service of Business or Commerce" from 01/05/2011. The appellant was directed to present a copy of this order and the calculation of the admitted service tax under infrastructure support service to the concerned authority.

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