2018 (8) TMI 1174 - AT - Service Tax

Nature of activity - Renting of Immovable Property Services or not - provision of the space for setting up the stores - consideration by way of amount calculated as percentage on the basis of net sales during the year - case of appellant is that they are not providing any taxable service and the agreements entered by them with M/s Pantloon & M/s Trent were for profit sharing - Whether the agreements between the appellant and M/s. Pantaloons and M/s. Trent Ltd. can be treated as agreement for renting of space or are these agreements only for profit sharing? - extended period of limitation - penalty. Held that - The appellants have provided the space to the said companies for conducting report of business and for provisions of the said space. They are receiving certain Fees , the said Fees cannot be anything other than as charges for provision of the space, hence is in nature of rent - The submission made viz-a-viz the other activities being undertaken by the appellant in terms of the said agreement do not justify to consider the amount received as anything other than rent because in view of the clause (4(b) of the agreement which specifically provides that The company shall be exclusively in charge of the management and running of the said business from the said premises . The conduct of retail business from the said premises was so responsible of the company which had necessary expertise in doing so. This is also supported by the fact that appellants are neither having necessary expertise/experience in the field of retail sales of the said product - the entire amounts received in terms of these agreements are nothing but rent for providing space for conducting the said retail business. Time limitation - Held that - There is no doubt that appellants had not disclosed the facts with regards to said two agreements to the department the other these facts which were in the knowledge where exclusively no disclosed hence suppressed. Accordingly, there is no denial that extended period has to be invoked for demanding the tax short paid - when vital facts for determination of the tax liabilities have been suppressed from the department invocation of extended period of limitation cannot be faulted with. Demand of Interest - Held that - Since taxes has not been paid when the demand of interest cannot be set aside. It is a settled law that interest is an absolute liability cannot be waived in any circumstances - demand of interest upheld. Penalties - Held that - Since in the present case tax has been evaded by resorting to fraud, suppression, mis-statement etc. penalty under Section 78 is justifiable - penalty u/s 76 also upheld - For failure to file proper returns penalty has been imposed under Section 77, which is also upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Whether the agreements between the appellant and M/s. Pantaloons and M/s. Trent Ltd. can be treated as agreements for renting of space or are these agreements only for profit sharing.
2. Whether service tax can be levied in respect of the services provided by the appellant under these agreements under the category of renting of immovable property.
3. Whether appellants have evaded payment of service tax by resorting to suppression, mis-statement, fraud, etc., justifying the demand by invoking the extended period of limitation.
4. Whether penalties under Sections 76, 77, and 78 are justifiable on the appellants.

Issue-wise Detailed Analysis:

1. Nature of Agreements: Renting of Space or Profit Sharing:

The appellants argued that the agreements with M/s. Pantaloons and M/s. Trent Ltd. were for profit sharing and not for renting of immovable property. They emphasized various clauses in the agreements that outlined business activities and advisory assistance provided by them. However, the Tribunal found that the appellants provided space for conducting retail business and received fees calculated as a percentage of net sales, which were essentially charges for provision of space, thus constituting rent. The Tribunal concluded that the agreements were indeed for renting of immovable property.

2. Levy of Service Tax under Renting of Immovable Property:

Service tax on "Renting of Immovable Property" was imposed from 1.6.2007. The Tribunal referred to Section 65(90a) of the Finance Act, 1994, which includes renting, letting, leasing, licensing, or other similar arrangements of immovable property for business or commerce. The Tribunal held that the agreements fell under this definition and were thus liable for service tax. The argument that the agreements were business arrangements or profit-sharing agreements was rejected, as the appellants' role was limited to providing space, which is taxable as renting of immovable property.

3. Evasion of Service Tax and Extended Period of Limitation:

The Tribunal found that the appellants had not disclosed the agreements to the department, amounting to suppression of facts. Consequently, the extended period of limitation was invoked for demanding the tax short paid. The Tribunal cited various judicial precedents to support the invocation of the extended period due to suppression, mis-statement, and fraud. The Tribunal held that the appellants' actions justified the invocation of the extended period of limitation.

4. Justifiability of Penalties under Sections 76, 77, and 78:

The Tribunal upheld the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Penalty under Section 78 was justified due to evasion of tax by fraud, suppression, and mis-statement. Penalty under Section 76 was upheld for failure to pay service tax, and penalty under Section 77 was upheld for failure to file proper returns. The Tribunal referred to judicial precedents that supported the imposition of penalties under these sections, even if the offenses arose from the same transaction.

Conclusion:

The appeal was dismissed, and the order of the Commissioner confirming the demand of service tax along with interest and imposition of penalties was upheld. The Tribunal concluded that the agreements were for renting of immovable property, service tax was leviable, the extended period of limitation was rightly invoked, and penalties under Sections 76, 77, and 78 were justifiable.