2022 (11) TMI 599 - AT - Service Tax

Levy of service tax - Business Support Service which includes infrastructural support or not - permitting ISFPL to use the land and plant, machinery and equipment ( PME ) at Palghar Factory on rental basis - demand of duty alongwith penalty - HELD THAT - From the extract of the agreement, it is clear that the appellant have not provided any regular services to the International Syntha Fabs Pvt Ltd (ISFPL) whereas they have given their plant and machinery equipment, on rental basis to International Syntha Fabs Pvt Ltd (ISFPL) for running their production activity wherein the appellant has not involved. From the said agreement, it is clear that the activity of the appellant falls under renting of immovable property in respect of land/ plant, land fixed plant. In respect of movable machinery equipment, the activity at the best can be classified as supply of tangible goods for use. It is undisputed fact that both services became taxable after the relevant period in the present case - since the very activity of the appellant have been brought under the taxable net subsequently it makes clear that the said activity was not covered under any taxable activity for the earlier period. The identical issue has been considered by this Tribunal in case of M/S BAJAJ HINDUSTAN LIMITED VERSUS CCE, LUCKNOW 2018 (5) TMI 552 - CESTAT ALLAHABAD wherein it was held that The activity of renting of land and renting of plant and machinery cannot fall under the said explanation so as to recovered by the definition of 'support services of business or commerce. The activity of the appellant i.e. of renting of immovable property and supply of tangible goods cannot be classified under infrastructural support service. Accordingly, the impugned order is not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of activity for service tax liability under Business Support Service, Jurisdiction of the proceedings, Invocation of extended period of limitation, Imposition of penalties under Section 76 and 78 of Finance Act.

Classification of Activity for Service Tax Liability under Business Support Service:
The case involved the classification of the appellant's activity for service tax liability under Business Support Service. The appellant leased its land and plant machinery equipment (PME) to another entity. The department contended that this activity falls under taxable Business Support Service. However, the appellant argued that during the disputed period, the activity was not taxable as per Section 65(105) of the Act. The appellant emphasized that the renting of immovable property services became taxable from a later date. The Tribunal analyzed the conducting agreement and relevant definitions. It concluded that the appellant's activity did not fall under infrastructural support service as they merely leased out their PME without providing day-to-day infrastructural support. The Tribunal referenced various judgments supporting this interpretation.

Jurisdiction of the Proceedings:
The appellant raised the issue of jurisdiction, stating that the proceedings were against their Silvassa factory while the activity in question was related to their Palghar factory. They argued that the jurisdiction of the proceedings did not extend to the Palghar factory under the then Vapi Commissionerate. The appellant cited judgments to support their jurisdictional argument. The Tribunal agreed with the appellant, highlighting that the proceedings lacked jurisdiction over the Palghar factory, rendering the impugned order liable to be set aside on this ground alone.

Invocation of Extended Period of Limitation and Imposition of Penalties:
The appellant contended that the extended period of limitation should not have been invoked as there was no intention to evade tax. They argued that the issue involved interpretation of law, where suppression cannot be alleged. Additionally, the appellant challenged the imposition of penalties under Sections 76 and 78 of the Finance Act. They claimed that these penalties should not be simultaneously imposed and that they were eligible for benefits under Section 80 of the Act. The Tribunal considered these arguments but ultimately set aside the impugned order based on the merit of the case, making the demand unsustainable and allowing the appeal.

In conclusion, the Appellate Tribunal CESTAT Ahmedabad analyzed the classification of the appellant's activity for service tax liability under Business Support Service, addressing jurisdictional issues, the invocation of the extended period of limitation, and the imposition of penalties. The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal on 11.11.2022.