2019 (1) TMI 319 - AT - Service Tax

Valuation - inclusion of discount allowed by the IGL to DTC - Department after detailed investigation reached to the conclusion that discount of ₹ 1.20 in the prevailing price of per kg. CNG was in fact in lieu of renting of immovable property to M/s IGL by the appellant - demand of service tax on such amount - whether Department is correct in treating the discount portion as renting of immovable property service? - invocation of penalty u/s 77 and 78 of FA. Held that - The appellant have let out a part of bus depot premises to M/s IGL for purpose of furtherance of business and commerce. As it is an admitted fact that M/s IGL is a business concerned engaged in the business of purchase and sale of Compressed Natural Gas on profit basis. The above-mentioned agreements between the appellant and IGL categorically mentions that discount which is given by M/s IGL to the appellant on the sale of CNG to them from the prevailing market prices is primarily in lieu of the space and logistic infrastructure provided by the appellant to M/s IGL. As per the provision of Section 67 (3) the gross amount charged for the taxable service shall include any amount received towards taxable service before during or after provision of such service - the amount of the discount received by the appellant is, in a way payment of rent for renting of immovable property in the form of space provided by them in their Bus depot to M/s IGL, that is to say the use of the space by M/s IGL and thus as per the provision of Section 67 the amount of discount need to be considered as a consideration for providing the service of renting out of the immovable property. The order-in-original is legally correct in holding that providing the space for setting up of dispensation units at DTC Bus depot premises with related infrastructure, on the consideration of discount @ 1.20 per kg. on CNG from the prevailing prices, amount to renting of immovable property for consideration. Penalty u/s 78 of FA - Held that - The crucial details and information have been suppressed from the Department which have led to the evasion of service tax - the provision of Section 78 and 77 of Finance Act, 1994 rightly invoked. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether the discount of ?1.20 per kg on CNG provided by M/s IGL to the appellant amounts to consideration for renting of immovable property.
2. Applicability of service tax on the discount received by the appellant.
3. Invocation of penal provisions under Sections 77 and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Whether the discount of ?1.20 per kg on CNG provided by M/s IGL to the appellant amounts to consideration for renting of immovable property:

The appellants are registered for providing business auxiliary services, advertising space services, and renting of immovable property services. The Department concluded that the discount of ?1.20 per kg of CNG was given in lieu of renting space to M/s IGL for installing dispensing units at the appellant's bus depots. The agreements dated 24/01/2005 and 24/12/2008 between the appellant and M/s IGL specified that the discount was for providing space and utilities for CNG infrastructure. The Tribunal found that the appellant had indeed let out part of their bus depot premises to M/s IGL for business purposes, thus constituting "renting of immovable property" as defined under the Finance Act, 1994.

2. Applicability of service tax on the discount received by the appellant:

The Tribunal examined Section 67 of the Finance Act, 1994, which deals with the valuation of taxable services. It was determined that the discount received by the appellant should be considered as a payment for the service of renting immovable property. The gross amount charged for taxable services includes any amount received before, during, or after the provision of such services. Therefore, the discount of ?1.20 per kg on CNG was deemed as consideration for renting the space, making it liable for service tax.

3. Invocation of penal provisions under Sections 77 and 78 of the Finance Act, 1994:

The appellant argued that there was genuine confusion regarding the leviability of service tax on the discount received. However, the Tribunal held that the appellant, being under the self-assessment scheme, should have sought clarification from the Department regarding their statutory liability. The failure to do so and the suppression of crucial information led to the evasion of service tax. Consequently, the Tribunal upheld the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, for non-compliance and suppression of information.

Conclusion:

The Tribunal concluded that the discount received by the appellant was indeed a consideration for renting immovable property and was liable for service tax. The penalties imposed under Sections 77 and 78 were justified due to the appellant's failure to clarify their tax obligations and the resultant evasion of service tax. The appeal was dismissed, and the order-in-original was upheld.