2017 (7) TMI 249 - AT - Service Tax

Tax liability - reimbursable expenditure towards the water and electricity charges and diesel charges - Held that - it is admitted facts in the impugned order that these are towards the reimbursement of expenditure incurred by the appellant and it is noticed from the impugned order that the adjudicating authority has relied upon the provisions of Rule 5(1) of Service Tax Valuation Rules for taxing this amount. The said provisions of Rule 5(1) of the Service Tax Valuation Rules amended for inclusion of reimbursable expenses for arriving at gross value - demand not sustainable - waiver of pre-deposit of amounts involved on this issue also needs to be stayed. CENVAT credit - input services - Renting of Immovable Properties Service - Held that - there is no dispute as to the fact these services were received by the appellant for construction of property which is used by the appellant for rendering Renting of Immovable Property Services on which appropriate service tax is discharged - tax liability does not arise. Application for waiver of pre-deposit of the amounts involved is allowed - recovery thereof stayed till the disposal of the appeal.

Summary

Issues involved:
1. Waiver of pre-deposit of service tax amount along with interest and penalties.
2. Taxability of security deposits received from tenants/customers.
3. Taxability of amounts received for reimbursement of water, electricity, and diesel charges.
4. Denial of CENVAT credit on input services used for construction of immovable property.

Analysis:

Issue 1 - Waiver of pre-deposit:
The appellant filed a stay petition for the waiver of pre-deposit of a substantial service tax amount along with interest and penalties. Despite the absence of representation by the appellant, the Tribunal proceeded with the case. After hearing the Departmental Representative and reviewing the records, the Tribunal considered the demand and confirmation of the service tax liability based on various issues.

Issue 2 - Taxability of security deposits:
The appellant argued that the security deposits collected were refundable and not related to any services rendered. They relied on legal provisions and precedents to support their claim. The Departmental Representative contended that the security deposits were received for future services under the category of Renting of Immovable Properties. The Tribunal found that the security deposits were returnable and not disputed by the adjudicating authority, supporting the appellant's case for waiver of the service tax on this amount.

Issue 3 - Reimbursement of charges:
Regarding the amounts received for reimbursement of water, electricity, and diesel charges, the adjudicating authority relied on specific rules for taxation. However, the Tribunal noted that the relevant rule had been struck down by the High Court, indicating a prima facie incorrect demand. Therefore, the application for waiver of pre-deposit on this issue was also granted.

Issue 4 - Denial of CENVAT credit:
The appellant claimed CENVAT credit on input services used for property construction, arguing that the property was used for taxable services. The Departmental Representative contested this claim. The Tribunal observed that the services were indeed used for rendering taxable services, aligning with a High Court decision. Consequently, the Tribunal found no prima facie service tax liability on this issue.

In conclusion, the Tribunal granted the appellant's request for waiver of pre-deposit on all contested amounts, staying the recovery until the appeal's final disposal. The decision was pronounced in court after the hearing, providing relief to the appellant on the tax liability issues raised in the case.