2017 (10) TMI 403 - AT - Service Tax

Renting of Immovable Property Service - leasing of license - Section 73 (1) of the Finance Act, 1994 - Held that - it is apparent that though licence is granted in respect of manufactory but the same is granted to the person. The licence given to a person in respect of a manufactory can be transferred to another manufactory on another site in the name of same person in terms of Rule 4-D & 16-4 of the said Rules. In view of above, it is apparent that while the licence is granted in respect of the manufactory it is not granted to the manufactory but to the person. In these circumstances, it is possible for a person to give on lease the licence while keeping the manufactory in his control. The licence can be granted even before the manufactory comes into existence. From the above Rules it is apparent that licence by itself is not a immoveable property and therefore leasing of licence cannot be treated as renting of immoveable property service - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of Service Tax under Renting of Immovable Property Service and penalties imposed under Finance Act, 1994.
2. Applicability of Service Tax on lease charges collected for licenses.
3. Denial of Cenvat Credit on photocopy of invoices.
4. Issue of limitation.
5. Confirmation of demand on lease and receipt amounts.

Analysis:

1. The appellant, engaged in manufacturing alcoholic beverages, leased licenses to another company and provided bottling services. The dispute arose regarding the collection and non-deposit of Service Tax, availing credit, and demand for bottling charges. The Commissioner confirmed some demands, which the appellant contested. The appellant argued that the license leased was not immovable property, emphasizing the definition of immovable property under the taxable service section. The Tribunal analyzed the agreements and ruled in favor of the appellant, stating that leasing a license is distinct from renting immovable property, thus allowing the appeal.

2. The appellant contested the demand for Service Tax on lease charges collected for licenses, arguing that licenses are not immovable property. The Assistant Commissioner argued that licenses cannot exist without the premises, citing relevant rules. The Tribunal examined the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, emphasizing that licenses can be transferred to different premises, indicating they are granted to individuals, not the property itself. The Tribunal upheld the appellant's argument, ruling that leasing licenses does not constitute renting immovable property.

3. The appellant disputed the denial of Cenvat Credit on photocopies of invoices, arguing they provided detailed explanations and submitted records. The Commissioner did not address the appellant's response adequately. The Tribunal noted the appellant's efforts and the lack of findings by the Commissioner, leading to the allowance of this appeal.

4. The issue of limitation was raised by the appellant, indicating a procedural concern. However, the judgment did not provide detailed analysis or resolution on this matter.

5. Lastly, the confirmation of demand on lease and receipt amounts was addressed. The Tribunal considered the arguments presented by both parties regarding the nature of licenses and the leasing transactions. The ruling favored the appellant, emphasizing the distinction between licenses and immovable property, leading to the allowance of this appeal.

In conclusion, the Tribunal analyzed various aspects of the case, focusing on the nature of licenses, immovable property, Service Tax applicability, and Cenvat Credit denial. The judgment provided clarity on these issues, ultimately favoring the appellant in most aspects, highlighting the importance of legal definitions and agreements in tax disputes.