2017 (3) TMI 728 - AT - Service Tax

Hiring of equipment and facilities - leasing of high quality fire equipments, electrical systems, Air Conditioning plants, DG sets, elavators, fixtures and fittings, chairs, carpeting, pantry and kitchen equipments, music and PA system, access control and security system, etc - Revenue s stand is that providing of office utilities, equipment and facilities by the appellant to the recipient is covered under Business Support Services(BSS), which has been defined u/s 65(104c) of the FA 1994 - Held that - From the prudent person s point of view, the said equipment and facilities are certainly in the nature of infrastructure. The appellant has provided them not on sale basis but on hiring basis. It means that there is continuous link of the appellant with these equipment. When there is a continuing link and nexus of the appellant with the said equipment and facilities it cannot be called that this is not an infrastructural support . And once it is an infrastructural support, the fact of providing the said equipment and facilities would be covered by the definition of Support Services of Business or Commerce as defined in section 65(104c) of FA, 1994 and, therefore, the collections made on account of providing these equipment and facilities to M/s Alcatel would be chargeable to service tax under section 65(105zzzq) as the Business Support Service provided by the appellant to M/s Alcatel. As the appellant clams that they have discharged their service tax liability on hiring charges also for the period of 01.06.2007 to 31.03.2010, the tax paid by the appellant can be appropriated by the department under the service head of Business Support Services - the matter needs re-examination. Penalty - Held that - the appellants have voluntarily made payment of service tax along with interest prior to issue of SCN - provisions of section 80 of the Finance Act, 1994 would be applicable in case of appellant assessee. Therefore, the penalties imposed on the appellant assessee under sections 77 and 78 are hereby dropped. Appeal allowed by way of remand.

Summary

Issues:
Appeal against confirmation of service tax demand, interpretation of "Business Support Services," liability for service tax on hiring charges, penalty imposition, applicability of section 80 of the Finance Act, 1994.

Analysis:
The appellant, M/s Indo Hong Kong Industries (P) Ltd, appealed against the confirmation of a service tax demand of ?1,02,21,578.00, along with interest and penalty, in relation to renting premises and providing equipment to M/s Alcatel Development India Private Ltd. The appellant contended that they did not provide engineering or maintenance services, and therefore, should not be liable under "Business Support Services" as claimed by the Revenue. The Revenue asserted that the services provided fell under "infrastructural support services," a part of the definition of "support services of business or commerce."

The Tribunal considered the period from 01.05.2006 to 31.03.2010. The appellant had paid service tax under "Renting of Immovable Property Services" for the period from 01.06.2007 to 31.03.2010. The demand for service tax against the appellant was for the period of 01.05.2006 to 31.05.2007 for collections made under the hiring agreement for equipment and utilities, termed as "Infrastructural Support Service." The appellant argued that they did not provide engineering and maintenance services, thus should not be categorized as "Infrastructural Support Services."

The Tribunal analyzed the nature of the equipment and facilities provided by the appellant, emphasizing that they were essential for the smooth functioning of an organization, constituting infrastructure. The continuous link and responsibility of the appellant for maintenance indicated an infrastructural support role. The Tribunal differentiated a previous case where a factory was leased out with machinery, noting the distinct hiring agreement in the present case for equipment and facilities.

Regarding penalties, the appellant contended that they voluntarily paid the service tax before the show cause notice, believing their services were not taxable. Citing relevant case laws, the appellant argued against penalty imposition. The Tribunal considered the applicability of section 80 of the Finance Act, 1994, and dropped the penalties imposed under sections 77 and 78 based on precedents.

Consequently, the impugned order was modified, and the matter was remanded to the original adjudicating authority to quantify the service tax payment for the period of 1.5.2006 to 31.5.2007 along with interest, within four months of the order. The appeal was partly allowed based on the above considerations.