2017 (11) TMI 537 - AT - Service Tax

Leasing of equipments - Department entertained a view that such renting of goods should be covered under taxable category of Business Support Service - Held that - providing of equipment on rent is not categorized in any of the activities itemized therein - the appellant is no way connected to the business establishment for running the business of the client and is only supplying the equipment on rental basis. Providing of equipment on rent, per se cannot be called infrastructure support service. The scope of BSS as defined cannot cover simple renting of equipments - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of "Support services of business or commerce" under Section 65(104c) of the Finance Act, 1994 for service tax liability on renting of equipment.

Analysis:
The appeal was against an order passed by the Commissioner of Customs and Central Excise, Jaipur, confirming a service tax demand against the appellant for providing air-conditioners, generators, etc., on rent basis in a hotel. The Department considered this renting of goods as falling under the taxable category of Business Support Service (BSS), resulting in a service tax demand of ?12,47,314/- along with interest and penalties. The Commissioner (Appeals) upheld the demand, leading to the appeal before the Tribunal.

The appellant argued that renting of goods like air-conditioners and generators does not fit within the definition of BSS. The appellant contended that since they only provided equipment on rent and were not involved in managing or providing infrastructural facilities for the hotel, their activity should not be considered as falling under BSS. On the contrary, the Revenue supported the findings of the impugned order.

Upon examining the statutory definition of "Support services of business or commerce" under Section 65(104c) of the Finance Act, 1994, the Tribunal observed that providing equipment on rent was not explicitly listed as an activity under this definition. The explanation appended to the definition clarified that infrastructural support services should include office utilities and facilities for smooth office operations. The Tribunal concluded that the appellant, by merely supplying equipment on a rental basis without involvement in the client's business operations, could not be considered as providing infrastructural support services. Therefore, the Tribunal held that the service tax demand under the BSS category could not be sustained in the appellant's case. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

In summary, the Tribunal's decision hinged on the interpretation of the statutory definition of "Support services of business or commerce," emphasizing that simple renting of equipment without providing infrastructural support services did not warrant service tax liability under the BSS category.