2019 (9) TMI 581 - AT - Service Tax

Renting of immovable property service - Demand of Service Tax - CBEC vide DoF No. 334/01/2007-TRU dated 28.02.2007 - HELD THAT - There is substantial merit in the argument of the appellant that the entire scheme was devised and executed much before the levy of service tax was introduced under the head of renting of immovable property service and therefore, the allegation that the appellant disguised the receipt of rent as non-refundable contribution is totally misplaced. A perusal of the SCN shows that there is no evidence whatsoever to support the allegation that what was collected was in fact rent and not non-refundable contribution. It is also seen that the entire scheme was devised under the supervision of Ministry of Textiles and it s representatives. In these circumstances the allegation appears to totally baseless - demand is set aside. Time Limitation - HELD THAT - It is seen that when the scheme was devised, there was no levy of service tax on renting of immovable property and thus they could not have any intention to evade or to manipulate records to receive rent as non refundable contribution. Thus, the demand on such count is also not sustainable on the ground of limitation as well. Reversal of CENVAT Credit - input services - construction of compound wall and laying of new pipelines - HELD THAT - The services in respect of laying of pipelines were availed during the year 2011-2012 the Commissioner observes that the service of construction of new compound wall and laying of pipeline of taxable park received by the appellant were not used by the appellant for providing output service nor were used in relation to setting up, modernization, renovation or repairs or premises of provider of output service - During the period 2006-2011, the unit was being set up and laying of pipeline and building wall is certainly part of renovation of premises and thus covered under the definition of input services - demand set aside. Business Auxiliary Services - amounts recovered under the head of finger analysis fee demanded under the head of technical testing and analysis service and tender and plant evaluation fee - Demand of service tax - HELD THAT - It is seen that the appellant had filed a VCES declaration in respect of service tax on technical testing and analysis services in respect of amount received under the head of finger analysis fee, however, the said VCES declaration was rejected - The appellants are not statutory body and no evidence in support of the claim that the activity undertaken by them is statutory in nature has been submitted - demand and penalty upheld. Demand of Service Tax - certain amounts under the head of tender and plant evaluation fee which relates to the amount charged from the members for verification of factory building, plant, FSI, parking, etc. - HELD THAT - The appellant has claimed that these are statutory requirements, there is no merit in the said arguments and as the appellant are not statutory body and no evidence in respect of statutory in nature of the activity is submitted - demand alongwith penalty upheld. Appeal allowed in part.

Summary

Issues Involved:

1. Demand of service tax on rental of immovable property.
2. Availment of Cenvat credit on service tax paid for construction of compound wall.
3. Availment of Cenvat credit on service tax paid for construction of new pipeline.
4. Service tax on Tender and Plan Evaluation Fees (under BAS) and Finger Analysis Fees (technical testing and analysis).

Issue-wise Detailed Analysis:

1. Demand of Service Tax on Rental of Immovable Property:

The appellant, M/s Gujarat Eco Textiles Park Ltd., set up a textile park under the Scheme of Integrated Textile Park (SIPP) floated by the Ministry of Textiles, Government of India. The SPV (Special Purpose Vehicle) formed for this purpose acquired land and developed infrastructure. The demand of ?4,26,54,866/- was made under the head of renting of immovable property service.

The appellant argued that the scheme and agreements were devised before the introduction of service tax on renting of immovable property (01.06.2007) and vacant land (08.05.2010). The revenue's claim that non-refundable contributions were disguised as rent was unsupported by evidence. The tribunal found that the entire scheme was devised under the supervision of the Ministry of Textiles and its representatives, and thus, there was no intention to evade tax. Consequently, the demand was set aside.

2. Availment of Cenvat Credit on Service Tax Paid for Construction of Compound Wall:

The appellant argued that the construction of the compound wall was essential for providing infrastructure support to member units and thus should be eligible for Cenvat credit. The tribunal referred to the decision in Navratna SG Highway Prop. Pvt. Ltd., which allowed credit on construction services used in providing output services. The tribunal found that the construction of the wall was part of the renovation of premises and thus covered under the definition of input services. The demand for reversal of Cenvat credit on this count was set aside.

3. Availment of Cenvat Credit on Service Tax Paid for Construction of New Pipeline:

Similar to the compound wall, the appellant argued that laying pipelines was necessary for providing infrastructure services. The tribunal found that the laying of pipelines was part of the renovation of premises and thus covered under the definition of input services. The demand for reversal of Cenvat credit on this count was also set aside.

4. Service Tax on Tender and Plan Evaluation Fees (under BAS) and Finger Analysis Fees (technical testing and analysis):

The appellant argued that Finger Analysis Fees were for mandatory internal checks required under statutory obligations and thus should not be subject to service tax. However, the tribunal found no merit in this argument as the appellant was not a statutory body and no evidence was provided to support the claim. The demand and penalty on this count were upheld.

Regarding Tender and Plan Evaluation Fees, the appellant claimed these were statutory requirements. The tribunal found no merit in this argument as well, as the appellant was not a statutory body and no evidence was provided. The demand and penalty on this count were upheld.

Conclusion:

The tribunal set aside the demand for service tax on rental of immovable property and the reversal of Cenvat credit on the construction of the compound wall and pipelines. However, the demand and penalties related to Tender and Plan Evaluation Fees and Finger Analysis Fees were upheld.