2020 (6) TMI 279 - AT - Service Tax

Recovery of Service tax - Renting of immovable property Service - benefit of exemption Notification No. 06/2005-ST dated 01.03.2005 - period Apri, 2009 to March, 2014 - threshold limit of ₹ 10 lakhs - HELD THAT - Admittedly, the period of demand is 2009 to 2014 i.e. pre as well as post Negative Regime. It is also admitted that gross rent received by appellant during these years is ₹ 15253485/- whereupon service-tax payable is ₹ 1748702/-. It is nowhere has been denied that some part of rent is received for sheds/shops/godowns used for the purpose of agricultural produce. With the introduction of Negative List Regime of Taxation w.e.f. 1.7.2012, the appellants' services were excluded from the tax liability - It is clear that the appellants, being an Agricultural Produce Marketing Committee, is excluded from the tax liability in terms of the above provisions. Services relating to agricultural produce by way of storage or warehousing are in the negative list - the appellants are not liable to service tax on renting of immovable property used for storage of agricultural produce in the market area - the adjudicating authority has by twisting the legal position has denied the exemption by mentioning Mandi Parished wrongly. Valuation - inclusion of rent received - clubbing of incomes of various Mandi Parishads - HELD THAT - The adjudicating authority has wrongly clubbed to incomes of various Mandi Parishads to that of appellant s value of rent received. Hence, said amount is also liable to be deducted - Since each Mandi Samiti has its own PAN number and that all the statutory dues like Income tax, House Tax other taxes are deposited separately individually, thus each Samiti is an independent legal entity and should be treated as a separate body - clubbing receipts of all Samitis is not justified and benefit of exemption limits should be given to the appellant. The rent received by appellant qua sheds rented for commercial purpose is liable to service tax. Also, the Proviso to Section 73(1) can be invoked only, where the service tax has not been paid or levied or short paid or short levied, by reason of fraud; or collusion; or willful mis-statement; or suppression of facts; or contravention of any of the provisions of Chapter V of Finance Act, 1994 or rules made thereunder with intent to evade payment of service tax by the person chargeable with service tax - Admittedly, the appellants are a Government Organisation; their functions are regulated by the said enactment and the rules. In such situation, it is clear that there will be a rebuttable presumption regarding non-existence of any of these ingredients on the part of the appellant. As there is no evidence of the appellants' malafide act to evade Service Tax liability by resorting to conduct, which will attract any of the serious allegation listed in the proviso to Section 73(1) of the Act - the demand confirmed against the appellant is liable to be set aside because the value of rent which falls within tax net and within normal period of limitations remains less than the threshold value of ₹ 10 lakhs in the impugned notification - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether M/s KUMS, Haridwar crossed the threshold limit of ?10 lakhs for service tax exemption.
2. Applicability of service tax on renting of immovable property used for storage of agricultural produce.
3. Clubbing of incomes from various Mandi Parishads for determining service tax liability.
4. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.

Detailed Analysis:

1. Threshold Limit of ?10 Lakhs:
The primary issue was whether M/s KUMS, Haridwar crossed the exemption threshold limit of ?10 lakhs for service tax during the period from April 2009 to March 2014. The gross rent received by the appellant during these years was ?1,52,53,485, with a service tax payable of ?17,48,702. The adjudicating authority was tasked with determining if the appellant exceeded the exemption limit after considering the documentary evidence.

2. Service Tax on Renting of Immovable Property:
The appellant argued that the services related to agricultural produce, such as renting sheds/shops/godowns for agricultural purposes, should be excluded from the service tax liability. The judgment referenced Section 66D of the Finance Act, which introduced the Negative List Regime effective from 1.7.2012, exempting services related to agriculture or agricultural produce from tax. The Tribunal held that the appellants, being an Agricultural Produce Marketing Committee, were excluded from tax liability for services related to agricultural produce, such as storage or warehousing, under the Negative List.

3. Clubbing of Incomes from Various Mandi Parishads:
The adjudicating authority had clubbed the incomes of various Mandi Parishads with the appellant's rent receipts, which the appellant contested. The judgment emphasized that each Mandi Samiti is a separate legal entity with its own PAN number, statutory dues, and financial assessments. The Tribunal supported this view, citing precedents like CCE, Ahmedabad Vs. S.C. Patel and CCE, Surat-II Vs. Catalco Chemical (P) Ltd., which held that clearances of different units with separate identities should not be clubbed. Consequently, the Tribunal ruled that the clubbing of receipts was unjustified and that the appellant should be given the benefit of exemption limits.

4. Extended Period of Limitation Under Section 73(1):
The Tribunal examined whether the extended period of limitation could be invoked under Section 73(1) of the Finance Act, 1994. This provision allows for an extended period if there is evidence of fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with intent to evade payment of service tax. The Tribunal noted that the appellants, being a government organization regulated by statutory enactments and rules, did not exhibit any of these ingredients. There was no evidence of malafide intent to evade service tax. Therefore, the demand for the extended period was not justified.

Conclusion:
In conclusion, the Tribunal held that the demand confirmed against the appellant was liable to be set aside. The value of rent falling within the tax net and within the normal period of limitations remained less than the threshold value of ?10 lakhs. The question of whether M/s KUMS, Haridwar crossed the threshold limit was decided in the negative, in favor of the appellant and against the department. Consequently, the order under challenge was set aside, and the appeal was allowed.

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