2018 (2) TMI 1414 - AT - Service Tax

Packaging Service - the appellant received charges for carrying out the activity of blending and packing of tea on behalf of M/s TATA Tea Ltd. - Department were of the opinion that the lease agreement by which the appellant made premises available on lease to M/s TATA Tea Ltd. was nothing but a camouflage for receiving additional consideration for the activity of packing - cum duty benefit. Cum duty benefit - Held that - the appellant has carried out the activity of blending and packing tea on behalf of M/s TATA Tea Ltd. It stands admitted by the appellant that the activity carried out was covered within the definition of the service of packaging and hence they have admitted their liability to pay service tax on such activity - reliance placed in the case of COMMR OF C. EX & CUS., PATNA Versus ADVANTAGE MEDIA CONSULTANT 2008 (3) TMI 59 - CESTAT KOLKATA , where it was held that when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable - the cum tax benefit allowed. Penalty - Lease agreement - receipt of consideration towards lease rent - Held that - the appellant w.e.f. that date has already started discharging the service tax liability under the above service and under the lease agreement. In the result, we are of the view that the service tax liability arises on the consideration received under the lease agreement only w.e.f. 01/06/2007 and the demand prior to this date is set aside - the service tax under rent of immovable property has already been paid alongwith interest prior to issue of SCN - penalty waived. Appeal allowed in part.

Summary

Issues:
1. Liability for service tax on packaging service
2. Genuine nature of lease agreement and liability for service tax

Analysis:
1. Liability for service tax on packaging service:
The appellant, engaged in blending and packaging tea for another company, was found liable for service tax on the activity of packing under the Packaging Service category. The Department contended that the lease agreement for factory premises was a guise for additional consideration for packing. The appellant admitted the liability for service tax on packing but disputed the Department's stance on the genuineness of the lease agreement. The appellant sought cum duty benefit and argued for liability only from the inclusion of renting of immovable property service in the statute from 01/06/2007.

2. Genuine nature of lease agreement and liability for service tax:
The Tribunal found that the appellant indeed carried out packaging activities for the other company, admitting to the liability for service tax on such activities. The Tribunal allowed cum tax benefit and reduced the demand based on legislative provisions. Regarding the lease agreement, the Tribunal noted the separate inclusion of renting of immovable property service in the statute from 01/06/2007. The Tribunal set aside the demand for service tax liability under the lease agreement before this date. The Tribunal also considered waiving the penalty based on precedents where service tax was paid before the issue of a show cause notice.

In conclusion, the Tribunal modified the impugned order, upholding the service tax demand on packaging service post-cum duty benefit extension. The appeal was partly allowed, considering the liability for service tax and penalty waivers based on legal precedents.