2024 (7) TMI 1074 - AT - Service Tax

Levy of service tax - renting of immovable property - buildings (at Corbett Ramnagar Naukuchiyatal) which were renting - eligibility for abatement of 40% in terms of N/N. 26/2012 - supply of Tangible Goods service - letting out plant/machinery and fixtures to M/s.Mahindra Holidays Resorts India Ltd. - extended period of limitation - penalty u/s 77 and 78 of FA. Renting of immovable property - HELD THAT - For the period upto June 2012 relying on the provisions of Section 65(105)(zzzz) and the Exclusionary Clause (d) which provided that building used solely for residential purposes and buildings used for the purpose of accommodation including hotels hostels boarding houses holiday accommodation tents camping facilities shall not be included in the category of immovable property for the purpose of business or commerce. The issue is no longer res integra as the same is considered on the earlier occasion also by this Tribunal in the case of AMBIENCE CONSTRUCTIONS INDIA LTD. VERSUS THE COMMISSIONER OF SERVICE TAX HYDERABAD 2012 (11) TMI 653 - CESTAT BANGALORE and also in the case of M/S JAI MAHAL HOTELS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE 2014 (7) TMI 540 - CESTAT NEW DELHI where the Tribunal held On a true and fair construction of provisions of the exclusionary clause under Explanation 1 to Section 65(105)(zzzz); and in particular sub-clause (d) thereof we are compelled to the conclusion that renting of buildings used for the purpose of accommodation including hotels meaning thereby renting of a building for a hotel is covered by the exclusionary clause and does not amount to an immovable property falling within the ambit of the taxable service in issue. The case of the appellant is that since renting of hotels is not covered in the Negative List but had become taxable therefore they have paid the service tax on the letting out of the hotel building w.e.f. 1.7.2012. Notification No.26/2012 dated 20.06.2012 exempted the taxable services of the description specified in Column (2) of the Table therein from so much of the service tax as in excess of the service tax calculated on a value which is equivalent to the percentage specified in the corresponding entry at Serial No.6 of this Notification i.e. renting of hotels inns guesthouse clubs camp sites or other commercial places meant for residential or lodging purposes to the extent of 60%. Thus under the specific entry in the notification the appellant is eligible for abatement to the extent of 40% and was liable to pay service tax on 60% of the value. Since the appellant have paid the service tax on 60% of the value of the rental amount received on letting out the said hotel they are not liable for any further payments towards service tax and therefore the demand for the balance amount stands dropped. Supply of tangible goods service - letting out of the Plant Machinery to MHRIL - HELD THAT - A perusal of Section 65(105)(zzzzj) and Section 66E(f) shows that the requirement to fall under such services remains the same which involves supply of tangible goods without transferring the right of possession and effective control of such goods. Further the definition also shows that service tax under SOTG is applicable when the goods are provided for use without transfer of right to possession and effective control whereas in the present case complete control and possession of goods have been given to MHRIL and hence they are excluded from the levy of service tax. Thus for the period from 01.07.2012 the appellants have admittedly deposited the service tax subject to the abatement in terms of the N/N. 26/2012 dated 20.06.2012 and therefore they are liable for service tax only to the extent of 60% of the value of the lease rent of the hotel - the appellants are not liable to pay service tax under the category of SOTG on the goods as they are part of the premises and are immovable. We are supported by the earlier decision of this Tribunal dated 13.09.2019 in the case of the appellant. Levy of penalty - HELD THAT - The issue was in the nature of interpretation and the transactions are duly recorded in the books of accounts which are maintained in the ordinary course of business and hence no ground for levy of penalty is made out. The impugned order is hereby set aside and the appeal is accordingly allowed.

Summary

Issues:
1. Liability for service tax under 'renting of hotels' and 'letting out of Plant/Machinery' under 'Supply of Tangible Goods'.
2. Applicability of abatement notification for service tax.
3. Liability for service tax on letting out of Plant/Machinery under 'supply of tangible goods'.
4. Imposition of penalty under Section 77 and 78.

Analysis:

Issue 1: Liability for service tax under 'renting of hotels' and 'letting out of Plant/Machinery' under 'Supply of Tangible Goods':
The appellant contested the demand of service tax under the categories of 'renting of hotels' and 'supply of tangible goods' for letting out a building to M/s. Mahindra Holidays and Resorts India Limited. The Adjudicating Authority confirmed the demand under 'renting of immovable property services' and 'supply of tangible goods services'. The Commissioner (Appeals) upheld this decision. However, the Tribunal referred to previous orders and concluded that renting of buildings for accommodation purposes, like hotels, falls under an exclusionary clause and does not amount to 'immovable property' for service tax purposes. Regarding the supply of tangible goods, it was determined that the appellant had transferred complete control and possession of goods, making them exempt from service tax under this category.

Issue 2: Applicability of abatement notification for service tax:
The appellant argued that they paid service tax on 60% of the value of the rental amount received for letting out the hotel building, as per Notification No.26/2012. The Tribunal found the appellant eligible for abatement to the extent of 40%, resulting in liability for service tax only on 60% of the value, and no further payments were required.

Issue 3: Liability for service tax on letting out of Plant/Machinery under 'supply of tangible goods':
The Tribunal analyzed the definition of 'supply of tangible goods' and relevant provisions to determine that the appellant, by giving complete control and possession of goods to M/s. Mahindra Holidays and Resorts India Limited, was not liable to pay service tax under this category.

Issue 4: Imposition of penalty under Section 77 and 78:
The Tribunal found that the issue was based on interpretation, and since the transactions were duly recorded in the books of accounts, no grounds for penalty imposition were established. Consequently, the impugned order was set aside, and the appeal was allowed.

This detailed analysis of the judgment showcases the Tribunal's thorough examination of the issues raised and the legal provisions involved, leading to a comprehensive decision in favor of the appellant.