2025 (6) TMI 189 - AT - Service Tax

Levy of service tax under the category of renting of immovable property service - Rents collected from shops by the Municipal Corporation through their circles - Rents collected from shops of / by Patna Regional Development Authority - Payment received from lease - Payment received from Licence Fee of Mobile Towers - Payment received from any other type of Rent and Licence Fee - Payment received as rent from Bus Terminal ISBT (Inter State Bus Terminal) daily collection - levy of late fees. Rent collected from shops / stalls during the impugned period - HELD THAT - The appellant has accepted this demand and it is not being contested in this appeal. Therefore the appellant is liable to pay the above demand of Service Tax along with interest if not already paid. However it is observed that the appellant has not suppressed any information from the department and hence intention to evade payment of Service Tax cannot be attributed to the appellant. For this reason no penalty is imposable on the appellant in respect of this demand confirmed and upheld along with interest. Rent collected from Guest Houses / shops and Space / Kiosks / Stalls / Grounds / Telephone Booths of Patna Regional Development Authority (PRDA) (presently merged with PMC) - HELD THAT - The appellant has accepted their service tax liability on this count. Hence the above demand of Service Tax along with interest is upheld and the same is liable to be paid if not paid already. However since there is no intention on the part of the appellant to evade payment of Service Tax no penalty is imposable on this count. Demand has been raised on the amounts received by the appellant in connection with leasing of shops which stands squarely covered under the definition of renting of immovable property service - HELD THAT - The definition of renting of immovable property service reproduced above it is observed that leasing of immovable property has been specifically covered in the definition. Accordingly the demand of Service Tax in this regard is upheld and it is held that the same is payable by the appellant along with interest. However there are no reason to impose penalties in respect of this demand confirmed as there is no intention to evade payment of Service Tax established on the part of the appellant on this count. Licensing Fee from mobile towers received - HELD THAT - These are in the nature of granting permission to the companies to erect and maintain their mobile towers. Such payments for acquiring the permission cannot be considered as rent to fall within the definition of renting of immovable property service as defined under Section 65(105)(zzzz) of the Finance Act 1994. Amount received from Bus Terminal ISBT (Inter State Bus Terminal) - HELD THAT - On examination of the nature of the service rendered in this regard it is opined that the said activity does not fall within the definition of renting of immovable property as it is meant for parking of the buses overnight as has been pointed out by the appellant. Consequently there is no liability to Service Tax on the said charges collected by the appellant under the category of renting of immovable property service . Accordingly the demand of Service Tax confirmed in this regard is not sustainable and hence the same is set aside. Levy of penalties - HELD THAT - The demands have been raised only on the basis of the documents maintained and furnished by the appellant. It is observed that the appellant has not suppressed any information and had no intention to evade payment of Service Tax. Accordingly the penalties imposed on the appellant under Sections 78 77(1)(a) and 77(1)(c) of the Finance Act 1994 are not sustainable and hence the same are set aside. Levy of late fees - HELD THAT - There were delays in filing the Returns by the appellant and hence we do not interfere with the late fee imposed under Section 70 of the Finance Act 1994 read with Rule 7(c) of the Service Tax Rules 1994 for failure to furnish their Returns in time. The same is therefore sustained. Conclusion - i) The demand of Rs.5, 92, 679/- on rent collected from shops / stalls is upheld along with interest. However no penalty is imposable in this regard. ii) The demand of Rs.1, 96, 800/- on rent received from Guest Houses / shops and Space / Kiosks / Stalls / Grounds / Telephone Booths of Patna Regional Development Authority (PRDA) is upheld along with interest. However no penalty is imposable in this regard. iii) The demand of Rs.56, 90, 044/- in respect of instalments of lease amount of shops is upheld along with interest. However no penalty is imposable in this regard. iv) The demand of Rs.35, 29, 439/- on Licensing Fee collected for granting permission to erect and maintain the mobile towers set aside. v) The demand of Rs.3, 17, 141/- is set aside. vi) The demand of Rs.47, 11, 279/- confirmed on the amount received for parking the buses at the Bus Terminal ISBT ( Inter State Bus Terminal ) set aside. vii) The penalties imposed on the appellant under Section 78 77(1)(a) and 77(1)(c) of the Finance Act 1994 are set aside. viii) The imposition of late fee under Section 70 of the Finance Act 1994 read with Rule 7(c) of the Service Tax Rules 1994 is upheld. Appeal disposed off.

Summary

The core legal questions considered in this appeal revolve around the applicability of Service Tax under the category of "renting of immovable property" service as defined under Section 65(105)(zzzz) read with Section 65(90a) of the Finance Act, 1994, on various receipts collected by the appellant. Specifically, the issues include whether the amounts received under different heads such as rent from shops, lease instalments, licensing fees for mobile towers, miscellaneous rents and licence fees, and charges for bus parking at the Bus Terminal fall within the ambit of taxable "renting of immovable property" service. Additionally, the legitimacy of penalties imposed under Sections 78, 77(1)(a), 77(1)(c) and late fees under Section 70 read with Rule 7(c) of the Service Tax Rules, 1994, including the invocation of extended period of limitation, were also examined.

Issue-wise Detailed Analysis:

1. Applicability of Service Tax on Rent Collected from Shops / Stalls (Category 1)

The appellant accepted the demand of Rs.5,92,679/- relating to rent collected from shops and stalls for the period 2007-08 to 2009-10. The Court noted that the appellant had not suppressed any information and had no intention to evade tax. The legal framework applied was the definition of "renting of immovable property" service under Section 65(105)(zzzz) and Section 65(90a) of the Finance Act, 1994, which includes renting, letting, leasing, licensing or similar arrangements of immovable property for business use. Since the appellant agreed to this demand, the Court upheld the tax along with interest but set aside penalties due to absence of evasion intent.

2. Applicability of Service Tax on Rent from Guest Houses, Shops, Kiosks, etc. of Patna Regional Development Authority (Category 2)

Similarly, the appellant agreed to the demand of Rs.1,96,800/- on rent collected from various properties under the erstwhile Patna Regional Development Authority. The same legal provisions as above were applied. The Court upheld the tax and interest but waived penalties for lack of evasion.

3. Applicability of Service Tax on Lease Instalments of Shops (Category 3)

The appellant contested the demand of Rs.56,90,044/- on amounts received as lease instalments, arguing these were not monthly rents but lease payments and thus not taxable under "renting of immovable property". The Court examined the statutory definition which explicitly includes "leasing" within "renting of immovable property". The Court referred to Explanation (1) to Section 65(105)(zzzz) clarifying "immovable property" includes buildings, land appurtenant thereto, and related common areas. The Court held that lease instalments fall squarely within the definition and upheld the demand along with interest. However, penalties were not imposed due to no evidence of tax evasion.

4. Applicability of Service Tax on Licensing Fee from Mobile Towers (Category 4)

The appellant challenged the demand of Rs.35,29,439/- on licensing fees collected for permitting companies to erect and maintain mobile towers, contending these fees were not rent. The Court analyzed the nature of the payment, distinguishing licensing fees (permission grants) from rent or lease payments. The Court found that such licensing fees do not constitute "renting of immovable property" service as per the statutory definition. The Court considered the precedent relied upon by the Revenue but found it distinguishable since that case involved lease of land for manufacturing, not licensing fees for erecting towers. Consequently, the Court set aside the demand, interest, and penalties on this count.

5. Applicability of Service Tax on Miscellaneous Rent and Licence Fees (Category 5)

The impugned order failed to specify the exact basis for the demand of Rs.3,17,141/- under this category. The Court held that without clear specification of how the amount fits within the definition of "renting of immovable property", the demand cannot be sustained. Therefore, the demand was set aside.

6. Applicability of Service Tax on Charges for Bus Parking at Bus Terminal (Category 6)

The demand of Rs.47,11,279/- related to charges collected from bus corporations for overnight parking at the Inter State Bus Terminal (ISBT). The appellant contended that this activity does not amount to renting. The Court examined the nature of the service, concluding that parking charges do not fall within the ambit of "renting of immovable property" service. The Court noted that the activity is a service for parking and not a lease or rental of immovable property. Accordingly, the demand was set aside.

7. Penalties and Extended Period of Limitation

The appellant argued that since all information was disclosed and returns filed, the invocation of extended limitation period and imposition of penalties under Sections 78, 77(1)(a), and 77(1)(c) of the Finance Act, 1994 were not justified. The Court agreed, noting absence of suppression or intent to evade tax. Hence, penalties were set aside. However, the Court observed delays in filing returns and upheld the late fee imposed under Section 70 read with Rule 7(c) of the Service Tax Rules, 1994.

Significant Holdings:

"The definition of 'renting of immovable property' service includes leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce."

"Licensing fees collected for granting permission to erect and maintain mobile towers do not constitute 'renting of immovable property' service as defined under Section 65(105)(zzzz) of the Finance Act, 1994."

"Charges collected for parking buses at the Bus Terminal do not fall within the 'renting of immovable property' service and hence are not liable to Service Tax under this category."

"Where the appellant has not suppressed any information or evaded payment of Service Tax, penalties under Sections 78, 77(1)(a), and 77(1)(c) of the Finance Act, 1994 are not imposable."

"Delays in filing Service Tax returns justify imposition of late fees under Section 70 read with Rule 7(c) of the Service Tax Rules, 1994."

Final determinations on each issue are as follows:

• Demands on rent collected from shops/stalls and from PRDA properties, as well as lease instalments of shops, are upheld with interest but without penalties.
• Demands on licensing fees for mobile towers, unspecified miscellaneous rents/licences, and bus parking charges are set aside.
• Penalties under Sections 78, 77(1)(a), and 77(1)(c) are set aside due to lack of evasion, but late fees for delayed returns are sustained.