2018 (2) TMI 154 - AT - Service Tax

Renting immovable of property service - case of the department is that the activity of letting out warehouses to FCI would attract service tax under section 65 (105 (zzzz) of the Finance Act, 1994 as renting of immovable property for business or commerce - Held that - As the appellant is providing various other services apart from the space for storage, therefore, the services appropriately fall under the category of Storage and Warehousing Services. Further, as these services are for agricultural produce, which is not in dispute, therefore, the appellant is not liable to pay service tax on Storage and Warehousing which has been exempted from service tax as per section 65 (105) zza) of the FA, 1994 - the appellant is not required to pay service tax on their activity - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of service tax under renting immovable property service category.

Analysis:
The appellant, an undertaking of the Government of Punjab, rented warehouses to the Food Corporation of India (FCI) for storage of food grains. The Department alleged that this activity attracted service tax under renting of immovable property for business or commerce. Show cause notices were issued to demand service tax under this category, which the appellant contested, claiming their activity fell under storage and warehousing, exempt from service tax. The impugned orders demanded service tax, interest, and penalties. The appellant argued that they provided storage of agricultural produce to FCI, along with additional services like insurance, record-keeping, sheds, light, and electricity, falling under storage and warehousing exempt from service tax.

The Department contended that the appellant failed to provide sufficient documents to prove their claim. The terms of agreement between the Punjab State Warehousing Corporation and FCI indicated the provision of storage-worthy godowns, insurance against specific risks, and fixed rates for various services. The District Manager's letter and the rates fixed by FCI further supported the appellant's engagement in storage and warehousing activities, including insurance and security services. The appellate tribunal examined the documents and concluded that the appellant's services indeed fell under storage and warehousing, exempt from service tax under section 65 (105) zza) of the Finance Act, 1994, as they provided various services beyond mere space for storage.

Therefore, the tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeals with consequential relief. The judgment highlighted that the appellant was not liable to pay service tax on their activities, emphasizing the exemption for storage and warehousing services for agricultural produce under the Finance Act, 1994.