2019 (3) TMI 1182 - AT - Service Tax

Revenue sharing - Demand of service tax - renting of immovable property service - Held that - There is no provision of any service to any other person and there is no service recipient or service provider relationship, which is an essential condition to attract service tax liability and the services per-se are rendered would be to sale itself - an identical issue was considered in the case of Ambience Hospitality P. Ltd. 2018 (12) TMI 1112 - CESTAT NEW DELHI , where it was held that the appellant has not delivered the possession of club to AMPL by way of tenancy but has only given the right to manage and operate the club for their mutual benefit, on principle to principle basis. Accordingly, we hold that the provisions of Service Tax are not attracted - thus, impugned order to the extent it confirms the demands raised on the appellant under the renting of immovable property services is unsustainable. CENVAT Credit - common input services and the services utilized for exempted output service - Rule 6 of CCR - Held that - Appellant has been pleading before the lower authorities that they have maintained separate records for the services rendered for the exempted category and they have not availed CENVAT credit of the service tax paid on common input services. The Adjudicating Authority it seems has not considered this plea in a holistic manner, and in a pedantic approach held that demand is liable to be confirmed - the Adjudicating Authority should be given an opportunity to reconsider the entire evidences on this point - Matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Service tax liability under the category of renting of immovable property.
2. Reversal of CENVAT credit on common input services used for exempted services.

Analysis:

Issue 1: Service Tax Liability under Renting of Immovable Property
The appeal challenged the Order-in-Original regarding service tax liability on amounts received for letting premises for food courts and entertainment zones. The appellant, PMCL, argued that agreements with M/s Hotel Kamal and M/s Harsha Hospitalities were based on revenue sharing, not renting of immovable properties. Citing a similar case, the appellant contended that revenue sharing does not fall under renting of immovable property for service tax. The Tribunal noted that the agreements involved revenue sharing and minimum guaranteed amounts, indicating a business arrangement rather than a service provider relationship. Referring to a previous case, the Tribunal held that service tax liability does not apply in such revenue-sharing arrangements. Consequently, the demands raised under renting of immovable property services were set aside in favor of the appellant.

Issue 2: Reversal of CENVAT Credit on Common Input Services
Regarding the reversal of CENVAT credit on common input services used for exempted services, the appellant claimed to have maintained separate records for exempted services and not availed CENVAT credit on common input services. The Adjudicating Authority did not consider this plea thoroughly and confirmed the demand. The Tribunal directed a reconsideration, emphasizing the need for a holistic review of evidence and adherence to natural justice principles. The appellant was instructed to cooperate and provide evidence of non-availment of CENVAT credit. The Tribunal remitted this issue back to the Adjudicating Authority for a fresh assessment, without expressing an opinion on the merits. The appeal was partially disposed of in favor of the appellant, with the issue of CENVAT credit reversal remanded for further review.

In conclusion, the Tribunal ruled in favor of the appellant on the service tax liability issue under renting of immovable property, citing the revenue-sharing nature of agreements. The matter of CENVAT credit reversal was remitted back to the Adjudicating Authority for a comprehensive reassessment, emphasizing adherence to natural justice principles.