TMI Blog2021 (7) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... he buildings or modules for rent or lease to their clients for their business or commerce. The lessees are required to undertake necessary alterations or modifications and certain finishing work and interiors to facilitate occupation of premises. It is also found that supply of electricity and water is incidental to renting of premises. Further it s found that supply of electricity, water and air-conditioning are obligatory and incidental for use of the rented or leased premises. The sale of water and electricity is a transaction of sale of goods and the assessee is not charging any service tax on the sale of water, electricity, airconditioning and supply of electricity by operating DG sets. The charges are collected separately. As per the Department, assessee has rendered composite services whereas as per the assessee, they have rendered only Renting of Immovable Property Service . Further as per the clause (1) of Section 65A which states that a taxable service would be classified in the category which gives the most specific description of the service provided is applicable in the case of the assessee. The rental or lease rental of the building takes into consideration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s can be included in the value of taxable supply for levy of service tax? - HELD THAT:- There is no finding that the notional interest on refundable deposit has resulted in undervaluation of service of renting of immovable property and further there is no evidence of nexus between the two - the notional interest on refundable deposit cannot be included in the value of taxable service for the purpose of levy of service tax and this issue is decided against the Revenue. Taxability of sale of space or time for advertisement - HELD THAT:- The sale of space or time for advertisement is classifiable independently as defined under Section 65(105)(zzzzm) of the Finance Act, 1994 and not under Business Support Service as confirmed by the Commissioner. Hence the demand of service tax under wrong classification of service is not sustainable in law - this issue is also in favour of the assessee. Whether bus service plying between the Technopark and Kariyavattom is liable to service tax under tour operator service or not? - HELD THAT:- The assessee has submitted declarations from respective vendors confirming remittances of service tax by them under respective registration numbers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmed the following demands of Service tax along with interest on the assessee:- (i) ₹ 1,23,38,130 (Rupee One Crore Twenty three Lakhs Thirty Eight Thousand One Hundred and Thirty Only) for the period 5/06 to 3/11, under the category of Business Support Service; (ii) ₹ 11, 07, 24,133 (Rupees eleven Crores Seven Lakhs Twenty Four Thousand One Hundred and Thirty Three Only), for the period 6/07 to 3/11, under Renting of immovable property service; (iii) ₹ 19,08,987 (Rupees Nineteen Lakhs Eight Thousand Nine Hundred and Eighty Seven Only), while dropping remaining amount of ₹ 4,50,289, for the period 4/08 to 3/11 and ₹ 3,87,14,111 (Rupees Three Crores Eighty Seven Lakhs Fourteen Thousand One Hundred and Eleven Only), for the period from 5/06 to 3/11, under Business Support Service; (iv) ₹ 31,345 (Rupees Thirty One Thousand Three Hundred and forty Five only), for the period from 5/06 to 3/08, under the category of Sale of Space or Time for Advertisement Service; (v) ₹ 2, 28,191/- (Rupees Two Lakhs Twenty Eight Thousand One Hundred and Ninety one only), for the period from 4/06 to 3/11, under the category of Tour Opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for supply of water, electricity, diesel generator charges, air-conditioning charges, car park charges etc. and concluded that there was short payment of service tax to the extent of ₹ 10,14,58,189/- under the proposed re-classification. The show-cause notice proposed to demand service tax on the following:- (i) Differential Service Tax on re-classification under the category of Support Services of Business or Commerce by including the Rent/lease Charges for building/rent, car Parking charges, Campus Maintenance Charges, Generator Charges, Electricity Charges, Water charges, Air-conditioning charges. (ii) Commitment Charges representing forfeiture of deposit made by Companies for lease of land for construction of their own buildings for use for commercial purposes, but agreements terminated due to breach of condition of non-payment of lease amount; (iii) Amount reimbursed by KSITIL, a Government of Kerala funded company; (iv) Notional Interest on the refundable deposits made by the Lessees.; (v) Sale of Space for Advertisement by clients; (vi) Transportation Service provided by M/s cosmos for plying buses for Pickup and Drop facility to the passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner has held in para 13(iii) that the services rendered by the assessee is something more than renting and it is also held in para 13(iv) that activities like Technopark Business Incubation Center (TBIC), Technopark Software Engineering Competency Centre (TSECC), etc. are such which clearly distinguish from mere renting and in para 13(v), that the lessees are not merely acquiring office space, but are buying into an environment with common facilities, power supply, common area, common maintenance and other common amenities and taking the whole ambit of transactions, as per the Commissioner, the service is more appropriately classifiable under Business Support Service rather than renting of immovable property as claimed by the assessee. He further submitted that the show-cause notice proposes to include price/value of various elements but Commissioner in para 14(ii) held that as regards rent and building maintenance, there is no dispute but the dispute pertains to only air-conditioning charges, generator charges, water charges and electricity charges. To counter the findings recorded in the impugned order, the learned counsel submitted that the supply of electricity, water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(37) STR 409 (Tri. Del.)] He further submitted that the findings recorded by the Commissioner in Para 13(iv) and 13(v) and the reasoning given by the Commissioner is completely flawed, contrary to law and beyond the plain language of the statutory definition of renting of immovable property . Rental or lease rental of the building takes into consideration the common facilities and the maintenance of the buildings. He further submitted that the Commissioner has accepted the fact that the assessee is a licensed distributor of electricity and in Para 14(iv) of the impugned order, he has allowed retrospective exemption under Notification No.45/2010-ST for distribution of electricity up to 21/06/2010 and further prospective exemption w.e.f. 22.06.2010 is allowed under Notification No.45/2010-ST. Learned counsel also submitted that the Technopark Business Incubation Center (TBIC) is a different entity registered as a society and eligible for exemption from service tax under notification No.09/2007-ST. Similarly Technopark Software Engineering Competency Centre (TSECC) is also different entity established for the purpose of facilitating software development by their clients. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii. Air Liquide North India Ltd. Vs. CCE, Jaipur [2017(4) GSTL 230 (Tri. Del.)] ix. CCE Vs. Tata Tech [2008(11) STR 449 (SC)] x. UOI Vs. Intercontinental Consultants Technocrats Ltd. [2018(10) GSTL 401 (SC)] 4.3. Issue No.2: Whether amount received from Kerala State IT Infrastructure Ltd. (KSITIL) is towards rendering Business Support Service ? Learned counsel submitted that KSITIL is a 100% State Government owned company acting as an apex body for developing IT infrastructure in the state of Kerala under whose supervision assessee/appellant s Technopark is established. He further submitted that as per the arrangements between the assessee and the KSITIL , Technopark would incur the expenses initially and later the entire amount would be reimbursed by the KSITIL. This was only an interim arrangement till the funds are released by the state government to KSITIL. The amount initially spent was later reimbursed by the KSITIL and the copy of Technopark ledger for the period 2008-2013 clearly shows all the expenses incurred on account of KSITIL which was reimbursed subsequently. He further submitted that the Commissioner himself has dropped the deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Vs. CCT, Bangalore [2020(40) GSTL 33 (Tri. Bang.)] iii. Samir Rajendra Shah Vs. CCE, Kolhapur [2015(37) STR 154 (Tri. Mum] iv. Ashiana Maintenance Services LLP Vs. CCE [2019(24) GSTL 47 (Tri. Del.)] v. Commissioner of Income Tax Vs. JK Investor (Bombay) Ltd. [248 ITR 723 (Bom)] vi. CCE, Mumbai-III Vs. ISPL Industries Ltd. [2003(154) ELT 3 (SC)] 4.5. Issue No.4: Taxability on sale of space or time for advertisement (May 2006 to March 2008). Learned counsel submitted that the sale of space or time for advertisement is independently classifiable as defined in Section 65(105)(zzzm) of the Finance Act, 1994 and not under business support service as confirmed by the learned Commissioner. He further submitted that the demand of service tax under wrong classification of service is not sustainable in law. 4.6. Issue No.5: Whether bus service plying between Technoparki and Kariyavattom is liable to service tax as Tour Operator Service by appellant?. Learned counsel submitted that the appellant had arranged operation of public transportation system for a nominal charge and the facility is open to members of public and was provided by M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earlier. He further submitted that the appellant has been discharging service tax on renting of immovable property, maintenance charges etc. and the Department has sought to change the classification and include various services provided by other independent entities in the value of service. The dispute is purely of interpretation and relating to classification of service and there is no suppression of facts or contravention of the Finance Act, 1994 with intention to evade payment of service tax. For this submission, he relied upon the following decisions:- i. CCE Vs. Singh Transporters [2018(13) GSTL J40 (SC)] ii. Madras Cements Ltd. Vs. CCE [2019(367) ELT A255(SC)] iii. CCE, Baroda Vs. Cotspun Ltd. [1999(113) ELT 353 (SC)] iv. Karnataka Industrial Areas Development Board Vs. CCT, Bangalore [2020(40) GSTL 33 (Tri. Bang.)] v. Tamil Nadu Housing Board Vs. CCE, Madras [1994(74) ELT 9 (SC); vi. BSNL Vs. CST Bangalore [2009(9) STR 499 (Tri. Bang.)] vii. Uniworth Textiles Ltd. Vs. CCE, Raipur [2013(288) ELT 161 (SC)] viii. Gangadhar Bulk Movers Pvt. Ltd. Vs. CCE, Nagpur [2012(27) STR 258 (Tri. Mum.)] ix. CST Vs. Vijay Television ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that the amount forfeited is not a consideration as the effect of breach of contract cannot be treated as provision of service. Since the contract is cancelled, there is no service per se rendered in terms of Section 65B(44) and Section 65E(e). In support of this submission, he relied upon the following decisions:- i. Lemon Tree Hotel Vs. CC [2020(34) GSTL 220 (Tri. Del.)] ii. KN Food Industries Pvt. Ltd. Vs. Commissioner of CGST C.Ex., Kanpur [2002(38) GSTL 60 (Tri. All.)] iii. Amit Metaliks Ltd. Others Vs. CCE ST, Bolpur [2019TIOL-3177-CESTAT-KOL] iv. CST Vs. Repco Home Finance Ltd. [2020-TIOL-1039CESTAT-MAD-LB] 5. On the other hand, the learned AR reiterated the findings in the impugned order and as far as Department s appeal is concerned, he submitted that the learned Commissioner has wrongly dropped the demand of service tax of ₹ 13,75,391/- on forfeiture of maintenance charged deducted by the assessee which has been contested by the assessee. 6.1. We have considered the rival submissions of both the parties and perused the material on record. As per the assessee, they have rendered renting of immovable property s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, Operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation.-For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security; (zzzq) to any person, by any other person, in relation to support services of business or commerce, in any manner; It is also relevant to reproduce CBEC(TRU) circular No.334/4/2006 dt. 28/02/2006 wherein the scope of business support service has been clarified:- 3.13. Business Support Services : Business entities outsource a nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the assessee. Further we find that the Tribunal as well as the Apex Court has held that supply of electricity amounts to sale of goods. Further in the case of ICC Realty India Pvt. Ltd. cited supra, the Tribunal has held that electricity is goods chargeable to duty under Central Excise Tariff as well as under the Maharastra Value Added Tax Act, 2002. Therefore supply of electricity to tenants amounts to sale of goods and not supply of service. Further the Notification No.12/2003-ST dt. 20/06/2003 exempt from service tax, any value of goods supplied by service provider to service recipient. By following the ratio of the decisions, the Bangalore Bench of the CESTAT in the case of Golf Links Embassy Business Park cited supra has held in favour of the assessee. Further we find that the finding of the Commissioner in Para 13(iv) that the activities like TBIC, TSECC etc. clearly distinguished the service from mere renting and as per the learned Commissioner, the more specific service rendered by the appellant is Business Support Service. The reasoning adopted by the Commissioner is completely misplaced and contrary to law and beyond the plain language of the statutory definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h expenses or costs as consideration and to be included in the value of service is contrary to the law laid down by the Hon ble Apex Court in the case of UOI Vs. Intercontinental Consultants Technocrats Ltd. cited supra. The relevant portion of the judgment is reproduced below:- 24 . In this hue, the expression such occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing such taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such taxable service . That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of lease after adjusting any recovery towards any unpaid amounts. More over security deposit is not a consideration or additional consideration for renting or leasing of the premises. There is no finding that the notional interest on refundable deposit has resulted in undervaluation of service of renting of immovable property and further there is no evidence of nexus between the two. This issue of inclusion of notional interest on refundable security deposit is settled issue now. We find that in the case of Murli Realtors Pvt. Ltd. cited supra, it was observed by the Tribunal that security deposit is taken for a different purpose altogether. It is to provide for a security in case of default in rent by the lessee or default in payment of utility charges or for damages if any caused to the leased property. Thus the security deposits serves a different purpose altogether and it is not a consideration for leasing of the property. Same ratio was followed in the case of Karnataka Industrial Areas Development Board cited supra. Honb ble High Court of Bombay has held in the case of Commissioner of Income Tax Vs. J.K. Investors (Bombay) Ltd. [248 ITR 723 (Bom.)] that notional i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner has not examined the documents submitted by the assessee and the various decisions relied upon by them in support of the fact that the impugned services fall in the definition of input service. Therefore we are of the considered view that for this issue, the matter needs to be remanded back to the original authority for the purpose of verification of various documents, declarations and the letters issued by the vendors who have paid the service tax for various impugned services. Therefore, for the purpose of cenvat credit, we remand the matter to the original authority to verify the claim of the appellant and then decide the issue of cenvat credit entitlement of the appellant. 6.8. As far as limitation is concerned, the assessee s submission is that they have not concealed any information from the Department and the Department was aware of the activities of the appellant. In this regard, we find that it is not in dispute that levy of service tax on Renting of Immovable Property was levied from 01/06/2007 and the appellant has been paying since then despite the fact that the same having been struck down as unconstitutional and thereafter the Finance Act, 2010 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax D Group issued a letter no. O.C No.742/2009 to inform that Technopark has to pay service tax on building maintenance and campus maintenance under the category Renting of immovable property only. vii. CERA conducted the audit of Technopark for the period 2009-10. viii. Letter OC 407/2009 dt.08.07.2009 of Range D, Superintendent communicating audit objections raised by CERA in 2009-10. In this we were informed about short payment of service tax under the head Renting of immovable property for the period 6/07 to 3/09 of ₹ 48.35 lakhs was pointed by audit and Technopark was required to pay the amount under renting of immovable property. Another issue pointed out, was ineligibility of architectural service as per circular 98/1/2008 dt.04.01.2008 of CBEC. ix. Our reply dt.13.08.2009 addressed to Superintendent Service Tax, Range-D explaining that there is no short payment of service tax under renting of immovable property service and that credit has been validly availed by us. x. Further letter OC.No.246/2009 dt.30.06.2010 was sent by Superintendent, Service tax D Group asking for the details regarding break up of our receipts from 01.04.2006 to 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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