2022 (11) TMI 949 - AT - Service Tax

Valuation of Services - inclusion of one time premium/salami in the assessable value - renting of immovable property service - applicability of Section 67 (1) of the Finance Act, 1994 - HELD THAT - The issue regarding includability of the one time premium in the assessable value has been examined by the Tribunal in the case of M/S. GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY VERSUS CCE ST, NOIDA 2014 (9) TMI 306 - CESTAT NEW DELHI where it was held that Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the premium or salami paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance. Thus, the payment on one time premium/ salami cannot be charge to service tax under renting of immovable property service. The demand on this count is set aside. Levy of service tax - scientific or technical consultancy service or not - signature bonus - appellant in respect of their contract with Torrent Power Ltd. received Rs. 10 Crore as signature bonus - HELD THAT - The said signature bonus is given for what the appellant brings to table for the purpose of such agreement. It is not for any specific service given by the appellant to M/s Torrent Power Limited. It is seen from the Show Cause Notice, Revenue has not pointed out any specific example of any service in the nature of Scientific and Technical Consultancy extended by the appellant to M/s Torrent Power Limited. It is noticed that para 2.3 of the agreement between the appellant and M/s Torrent Power Limited uses the expression for its expertise and consultation services in Power Project . It is not necessary that the expertise and consultation services can only be scientific and technical in nature. To be classified under scientific and technical consultancy service, the services and the consultancy should be in the field of science and technology. No evidence has been produced by Revenue to substantiate the claim that the consultancy provided, if any, in the nature of scientific and technical consultancy. The scope of responsibilities of M/s GPCL is very wide. Only a small part of their services could possibly fall under the category of scientific and technical consultancy in terms of the abovementioned obligations of GPCL. Most of the services relates to formalities and clearances from the government - it is not found that the evidence produced by the Revenue to substantiate the claim that the services provided by the appellant was in the nature of scientific and technical consultancy is absolute. There are no merit in the argument of the Revenue that any service in the nature of Scientific and Technical Consultancy has been provided by the appellant to M/s Torrent Power Limited. Consequently, the demand on this count is therefore set aside. Demand of Rs. 1,29,71,525/- under works contract services is sustainable - valuation of the service tax provided by the appellant to M/s PGVCL for supply and erection of single point lighting action on turn key basis - proper valuation method as per Service Tax Valuation Rules 2006, followed or not - HELD THAT - It is seen that the show cause notice seeks to appropriate the amounts already paid under the head of service tax and interest. Rule 2A of the Service Tax Valuation Rules 2006 is very clear and the appellant have also admitted their liability and paid the same. In these circumstances, there are no error in the impugned order appropriating the legally due service tax and interest paid by the appellant. The observations made by the Commissioner on the charge of suppression and imposition of penalty is agreed upon - the provisions of law in Rule 2A of Service Tax Valuation Rules 2006 is very clear and unambiguous. In these circumstances, the actions of the appellant can only be malafide - impugned order upheld. Levy of Service tax - consideration of Rs. 1,63,77,215/- received from M/s PGVCL being 2% of the value of the project as development charge - business auxiliary services or not - HELD THAT - It has been pointed out that the demand is vague in nature without specifying under which category of Business Auxiliary Service the demand has been raised. We have seen para 5 and 5.1 of show cause notice where the charges of demand under this head has been mentioned. It is seen that there is absolutely no indication as to how the amount received by the appellant would qualify as Business Auxiliary Service. It is a bland allegation without any substantiation and therefore it cannot be upheld - demand under this head and the penalty imposed under this head is set aside. Rent income - short payment of service tax - Whether service tax of Rs. 97,335/- is payable on the income of Rs. 9,45,000/- during the year 2009-10? - HELD THAT - This issue relates to demand of service tax of Rs. 97,335/- on an amount of Rs. 9,45,000/- received by the appellant in the year 2009-2010. The only ground on which the appellant has defended it is that it falls within the basic threshold limit of Rs. 10 Lakhs during the relevant time. We find that demand under head of signature bonus or one time payment have not been sustained in para 2 and 3 above. Consequently, the appellant succeeds in its argument that the value being threshold limit no tax can be charged. The appeal on this count is allowed. Levy of service tax - payments made to the foreign entities - reverse charge mechanism - extended period of limitation - HELD THAT - The defence is mainly on the ground that the demand is barred by limitation as credit of the said service tax was admissible to the appellant. The appellant have made a bland statement that credit of these taxes paid would be admissible to them, they have not mentioned under what are the taxable output services in respect of which these input service could be availed as cenvat credit. In absence of the said evidences, the reliance on the aforesaid case law cannot be made. In the appeal memorandum, the appellants have argued that the Commissioner has failed to give any findings on the defence regarding non-taxability of services received from M/s Atlantis Resources Corporation Private Limited and M/s Solar Media Limited. The appellant have not raised any fresh grounds in their appeal memorandum. There are significant force in the argument in order-in-original - there are no merit in the defence of the appellant. The demand under this head along with penalties is upheld. Non-payment of service tax on gross amount of 'Development Charges' from their customers under Real Estate Agent Service - demand on the ground that the appellant was paying service fax on receipt basis, however, as per the service tax rules, with effect from 01.07.2011 the liability to pay service tax was as and when the invoices were being raised - HELD THAT - The liability to pay service tax prior to 01.07.2011 was arising at the time of receipt of consideration. The appellant claimed that he was not aware of the change which came on 01.07.2011 and consequently in respect of 22 invoices, the appellant failed to pay service tax on time - It is seen that the appellant is not a small assessee and the claim of ignorance of law is not good enough to bypass their responsibilities. The appellant has however discharged the said liability along with interest. The law was not ambiguous but was very clear at the material time. In these circumstances, there are no merit in the arguments of the appellant. It is seen that the appellant was paying service tax on the receipt basis and could not have possibly avoided payment of these amounts of service tax. The appellant would have in normal course paid the service tax at the time of receipt of consideration. Invoking Section 80 of the Finance Act, 1994, it is opined that penalty imposed under Section 78 on this count needs to be set aside. Appeal on this count is partially allowed. The order is upheld except for penalty under Section 78, which is set aside. Levy of service tax of Rs. 13,43,547/- under Rule 6(3) of the Cenvat Credit Rules, 2004 - cenvat credit on Solar Power Project on the Plot developed by the appellant themselves - levy of interest - HELD THAT - No evidence has been produced by the appellant that the credit of Rs. 13,473,547/-, relates to Wind Mills operated by the appellant. However, in many circumstances, credit of services availed in respect of Wind Mills located away from the factory is admissible. The exact nature of transaction in the instant case is not clear from the appeal memorandum or from arguments made by the appellant. Moreover, this argument was not raised before the lower authority. In these circumstances, we set aside the demand on this count and remit the matter back to the original adjudicating authority for fresh adjudication - Matter on remand. CENVAT Credit - input services or not - security service - housekeeping service - gardening services - advertisement services - maintenance of guest house services - HELD THAT - The appellant has submitted that such services being in the nature of security service. housekeeping service, gardening services, advertisement services and maintenance of guest house services, were input services inasmuch as they had a direct nexus with the solar power project which was going on at Charanka. The Commissioner has not considered such submission made by the appellant and on a very flimsy ground has just held that the appellant is not in a position to prove how these are input services. He submitted that all the services mentioned in Annexure- X are services which are in the nature of input services and hence such services are admissible for the purpose of cenvat credit. Therefore, the order of the Commissioner rejecting cenvat credit to the tune of Rs.11,67,454/- is not sustainable. As regards the remaining amount, the appellant had submitted that since the appellant is a big concern and receiving so many different services, the appellant being under a bona-fide impression took cenvat credit of such services and it was not because of any mala-fide intention, that the cenvat credit was availed. Therefore, for the remaining amount, the demand under the extended period of limitation would not be sustainable inasmuch as availment of cenvat credit is a subject matter of interpretation and even the department has not alleged that the appellant had any ill-intention to avail wrongful credit. Therefore, such demand over and above Rs.11,67,454/-is time barred and liable to be set aside in the interest of justice. The impugned order observes that no credit on travelling expanses is available to the assessee under Rule 2(l) of the Cenvat Credit Rules -2004. In view of above, he has specifically denied the cenvat credit in respect of service tax paid for Hotel Expanses, Personal Accident Policy Premium, Air Ticket Charges, Personal Telephone Expanses, Servicing and Repairing of Car, Security Service provided at place other than registered premises and Outdoor Catering etc. No reasoning has been given by the Commissioner as to how and why these services are excluded from the term Input Service . In view of above, the demand on this count is set aside and matter is remanded to the Commissioner for fresh adjudication and for giving detailed reasoning after following the principles of natural justice. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Service tax on one-time premium/salami under renting of immovable property.
2. Service tax on signature bonus under scientific or technical consultancy service.
3. Demand of service tax under works contract services.
4. Service tax on consideration received from M/s PGVCL under business auxiliary services.
5. Service tax on rent income considering the threshold exemption limit.
6. Service tax under reverse charge mechanism on payments made to foreign entities.
7. Service tax on development charges invoiced but not received.
8. Service tax under Rule 6(3) of the Cenvat Credit Rules, 2004.
9. Demand of Cenvat credit on various services.

Detailed Analysis:

1. Service Tax on One-Time Premium/Salami:
The appellant contested the demand of Rs. 11,80,19,611/- under renting of immovable property service, arguing that one-time premium/salami cannot be considered as rent. The Tribunal referenced previous decisions, including *Greater Noida Industrial Development Authority v. CCE & ST* (2015), which clarified that premium is a capital income and not subject to service tax. The Tribunal concluded that one-time premium/salami is not taxable under renting of immovable property service, setting aside the demand.

2. Service Tax on Signature Bonus:
The appellant argued that the signature bonus of Rs. 10 Crores received from Torrent Power Ltd. was not for scientific or technical consultancy service but a contractual obligation. The Tribunal found no evidence of specific scientific or technical consultancy services provided for this payment. The Tribunal held that the signature bonus was not taxable under scientific or technical consultancy service, setting aside the demand.

3. Demand of Service Tax Under Works Contract Services:
The appellant was accused of not following proper valuation methods, leading to a demand of Rs. 1,29,71,525/-. The Tribunal noted that the appellant had paid the service tax and interest upon audit detection. The Tribunal upheld the demand and interest but set aside the penalty, stating that the appellant's actions were not malafide.

4. Service Tax on Consideration from M/s PGVCL:
The department sought to tax Rs. 1,63,77,215/- received from PGVCL under business auxiliary services. The Tribunal found the demand vague as the show cause notice did not specify the nature of service or the specific clause under business auxiliary services. Citing previous decisions, the Tribunal set aside the demand and penalty.

5. Service Tax on Rent Income:
The appellant argued that the rent income of Rs. 9,45,000/- was below the threshold exemption limit of Rs. 10,00,000/-. The Tribunal noted that since the demands under signature bonus and one-time premium were not sustained, the appellant's total income did not exceed the threshold limit. The Tribunal allowed the appeal on this count.

6. Service Tax Under Reverse Charge Mechanism:
The department demanded service tax on payments made to foreign entities M/s Atlantis Resources Corporation Pvt. Ltd. and M/s Solar Media Ltd. The appellant argued that the services were performed outside India and were revenue-neutral. The Tribunal upheld the demand and penalties, stating that the services were rendered in India and the appellant was liable under reverse charge mechanism.

7. Service Tax on Development Charges:
The appellant failed to pay service tax on 22 invoices amounting to Rs. 74,61,38,167/- due to a change in rules effective from 01.07.2011. The Tribunal found no merit in the appellant's ignorance of law argument but set aside the penalty under Section 78, invoking Section 80 of the Finance Act, 1994, as the appellant would have eventually paid the tax upon receipt.

8. Service Tax Under Rule 6(3) of the Cenvat Credit Rules, 2004:
The appellant reversed the credit of Rs. 13,43,547/- but did not pay interest. The Tribunal remanded the matter to the original adjudicating authority for fresh adjudication, noting that the appellant's arguments regarding the nature of services and applicability of Rule 6(3) were not fully addressed.

9. Demand of Cenvat Credit:
The appellant contested the demand of Rs. 17,90,125/-, arguing that certain services were input services. The Tribunal found the Commissioner's order lacked detailed reasoning and remanded the matter for fresh adjudication, requiring a detailed examination of each service's eligibility for Cenvat credit.

Conclusion:
The appeal was disposed of with specific directions on each issue, including setting aside certain demands and penalties, remanding some matters for fresh adjudication, and upholding others.