2018 (8) TMI 1689 - AT - Service Tax

Renting of immovable property Services - appellant have allotted land in the Gazipur market yard which is known as flower marketing committee to various dealers/traders on the basis of a monthly licence fee - Held that - It is a matter of record that the appellant have provided phars/tin sheds on charging of a licence fee in the flower marketing yard at Gazipur. The licence fee for Phars /Tin Sheds is chargeable on monthly basis and they have not paid any service tax on the amounts recovered as lease fee/rent from the various traders using the premises of the appellant. For an activity or service to be covered under the definition of renting of immovable property, following ingredients need to be satisfied (i) That service must be provided by any person to any other person by renting of the immovable property; (ii) That such renting is for use in the course of or for furtherance of the business or commerce - It can be seen that both the conditions are being fulfilled in the present case. Negative list - Section 66D of the Finance Act, 1994 - case of appellant is also that their activity are also covered by Section 66D of the Finance Act, 1994 which covers the negative list of items which are exempted from the levy of service tax - Held that - The activities which are covered under Section 66D (a) are of the nature which are purely in the public interest and undertaken as a mandatory and statutory function. We find that the appellant is a body which is not a local authority and therefore the exemption under Section 66D (a) is not available to them - the shops which are rented by the appellant for business does not fall under the negative list under Section 66D (d) of Finance Act, 1994. The provisions of Section 66D (d) (iv) of the Finance Act, 1994 only provides when the agriculture land is used for agriculture or for its producers but not for shops which are used for carrying out business or commerce - thus, the activity of renting of phars/tin sheds/shops for marketing/trading of flowers etc. by the traders is taxable under the category of renting of immovable property. Leviability of service tax under the extended time - Section 73 (1) of the Finance Act, 1994 - penalty u/s 78 - Held that - The ingredients of intention to evade service tax are certainly missing in this case and there have been genuine confusion regarding the leviability of service tax on the rents collected by the various agricultural produce marketing boards/committees in this regard - The extended time proviso in this case is not legally invokable in this case - penalty under Section 78 of the Finance Act, 1994 is also not invokable in this case. The appeals are therefore allowed by way of remand to the Original Adjudicating Authority with the direction that demand of service tax need to be confirmed for all the show cause notices for the normal period of demand - no penalty under Section 78 need to be imposed - appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant's activity of renting phars/sheds to traders is subject to service tax under the category of renting of immovable property.
2. Whether the appellant's activity falls under the negative list of services exempted from service tax under Section 66D of the Finance Act, 1994.
3. Whether the extended time period for demanding service tax and penalty under Section 78 of the Finance Act, 1994 are applicable in this case.

Analysis:
1. The appellant, a market body facilitating flower sales, rented land in Gazipur market yard to traders. The Department issued show cause notices alleging renting of immovable property subject to service tax. The appellant contended the land was provided for temporary structures, not renting immovable property. The Tribunal found the activity met the definition of renting immovable property under Section 65(105)(zzzz) of the Finance Act, taxable as such.

2. The appellant argued for exemption under Section 66D(a) and (d) of the Finance Act. The Tribunal determined the appellant did not qualify as a local authority under Section 66D(a) and the rented shops did not fall under the exemption for agricultural activities in Section 66D(d). Thus, the activity of renting phars/sheds for trading flowers was taxable as renting of immovable property.

3. Regarding the extended time period for demanding service tax and penalty under Section 78, the Tribunal found no intention to evade service tax, citing a Supreme Court judgment. It held the extended time provision and penalty were not applicable due to genuine confusion about service tax liability. The appeals were allowed, directing confirmation of service tax for normal demand period without imposing penalty under Section 78.

This judgment clarifies the taxability of renting immovable property for commercial activities, the applicability of exemptions under the Finance Act, and the criteria for invoking extended time provisions and penalties under Section 78.