2017 (6) TMI 224 - AT - Service Tax

Renting of immoveable property service - short payment of tax - Held that - no demand has been raised for the period after 31st March 2007 when renting of immovable property service was taxed for the first time u/s 65 of FA 1994. Neither has there been any objection from the jurisdictional service tax authorities to the discharge of tax liability under this head for the period thereafter on the entirety of receipts - The payment of these taxes was well within the knowledge of the tax authorities from the date of filing of the first return after the introduction of the tax; there is no scope therefore for invoking the extended period to demand the tax from May 2006 onwards. The jurisdictional tax authorities have not objected to the subsequent discharge of tax liability as provider of renting of immovable property service - Having accepted the taxability for providing a specific service it is not open to the tax authorities to claim its share in the form of a levy under a different head merely because renting of immovable property service was not taxable prior to 1st June 2007. Alleged short-payment of tax under the head of maintenance or repair service - Held that - appellant has discharged a major portion of the tax liability on the consideration received as maintenance charges at no stage has the appellant made a reference to this concession in its defence. It would therefore appear that the tax authorities have dealt with an aspect that has nothing to do with recoveries from lessees as maintenance charges - appellant cannot also be faulted in making its contention that maintenance or repair service are rendered to owners/possessors of immovable property and is not amenable to stretching for coverage of maintenance charges levied by owners from lessees for the purposes of meeting expenditure due to professional maintenance or repair entities - demand of alleged short-payment of tax is without any foundation and deserves to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxability of consideration received by M/s Phoenix Mills from lessees for various charges and alleged short-payment of tax for specific periods.

Analysis:
The appeal involved a dispute regarding the taxability of consideration received by M/s Phoenix Mills from lessees for amenities/service charges, business center charges, etc., for the period from May 2006 to May 2007. The tax authorities asserted that M/s Phoenix Mills was liable for tax under the category of 'business support service' and 'maintenance and repair service' for certain periods, resulting in a demand of ?2,03,07,932. The Commissioner confirmed this demand, leading to the appeal.

The appellant challenged the jurisdiction of the Commissioner to adjudicate the show cause notice, arguing that they had been discharging tax on all receipts from lessees under 'renting of immovable property service' from June 2007 onwards, and no notice had been issued for recovery beyond that date. They contended that all charges from lessees were variations of rental income.

Upon analysis, the Tribunal found that no demand had been raised post-March 2007 when 'renting of immovable property service' was first taxed. The tax authorities were aware of the tax payments from the introduction of this tax, precluding the invocation of an extended period for demanding tax from May 2006. The Tribunal noted that the tax authorities had accepted tax payments under 'renting of immovable property service' post-June 2007 and could not claim additional tax under a different head retrospectively.

The Tribunal emphasized that the tax authorities misdirected the proceedings by confirming the demand and imposing penalties. They highlighted that the tax system pre-July 2012 aimed to levy taxes on specific services, as clarified by legal precedents. The Tribunal set aside the demand, stating that the tax authorities' interpretation of legislative intent was erroneous, and the foundation of the demand was weak.

Regarding the alleged short-payment under 'maintenance or repair service,' the Tribunal found discrepancies in the interpretation of charges as maintenance-related. They concluded that these charges were additional rental income, not maintenance charges, and set aside the demand for alleged short-payment, stating that it lacked foundation.

Ultimately, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that the tax authorities' approach was flawed and the demand lacked merit.