2022 (7) TMI 1117 - AT - Service Tax

CENVAT Credit - Short payment of Service Tax - Transport of Goods by road - Business Auxiliary Services - Renting of immovable property services - rent received from their clients by way of reimbursement - extended period of limitation - penalty u/s 78 of FA - HELD THAT - It is an admitted fact that the appellant have received the rent for the use of the said premises from their clients, by way of reimbursement, whose goods are stored and transported by the appellant. Further, the admitted fact is that the appellant have paid input tax on the rent for the use of the godown of M/s. Excellent Packaging, which is also a registered assessee. Further, the admitted fact is that the appellant have duly accounted for all the receipts in the books of accounts maintained in the ordinary course. The issue appears to be wholly interpretational in nature, as it appeared to the appellant that they have received lesser rent than the rent paid by them for the same godown and accordingly, they are not liable to pay service tax. CENVAT Credit - HELD THAT - The denial of input cenvat credit for the rent paid by the appellant to M/s.Excellent Packaging is erroneous and against the provisions of law - the appellant is entitled to cenvat credit for the rent paid by them to M/s. Excellent Packaging for hiring of the godown as the same is input service for them. They have also received the rent from their clients by way of providing output service for the same premises, which is held to be taxable. Penalty under Section 78 of FA - HELD THAT - The penalty under Section 78 is reduced to Rs.10,000/-. The matter to the Adjudicating Authority for the limited purpose of re-calculating the tax liability, after taking into consideration the input cenvat credit available to the appellant for the rent paid as well as any other input service received by them, in accordance with law - Appeal allowed by way of remand.

Summary

Issues:
1. Short payment of service tax on rent received by the appellant.
2. Discrepancy in declaration of rent received in ST-3 Returns.
3. Entitlement to cenvat credit for input service.
4. Imposition of penalty under Section 78.

Analysis:
1. The case involves the appellant, registered with the Service Tax Department, providing services under various heads. They rented godown premises from another registered entity and paid rent along with service tax. During an audit, it was alleged that the appellant short paid service tax on the rent received. The appellant also received reimbursement from clients for the rent, which was accounted for as "Other Income." A show cause notice was issued invoking the extended period of limitation due to alleged non-disclosure of tax liability.

2. In response, the appellant contended that the rent was received as reimbursement from clients and they paid more rent than the amount collected from clients, making the situation revenue neutral. The Asstt. Commissioner rejected this argument, confirming the demand and imposing penalties. The Commissioner (Appeals) upheld this decision, noting non-declaration of rent in ST-3 Returns. The Tribunal observed that the appellant accounted for all transactions and maintained records, finding the issue to be interpretational. It held that the appellant was entitled to cenvat credit for the rent paid, remanding the matter for re-calculation of tax liability.

3. The Tribunal reduced the penalty under Section 78 and directed the Adjudicating Authority to recalculate the tax liability considering input cenvat credit. It emphasized that the rent paid was an input service for the appellant, who also provided output service for the same premises. The appellant was instructed to appear before the Authority for finalization of any tax demand based on the Tribunal's decision.

4. In conclusion, the appeal was allowed in part, recognizing the appellant's entitlement to cenvat credit and reducing the penalty. The matter was remanded for re-calculation of tax liability in accordance with the law, emphasizing the interpretational nature of the issue and the appellant's compliance with maintaining records and declaring transactions.