TMI Blog2022 (4) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of MURLI REALTORS PVT. LTD., MAGRPATTA TOWNSHIP DEVELOPERS CONSTRUCTION CO. LTD., JAIN CONSTRUCTION, SAI CONSTRUCTION PVT. LTD., INDIA LAND INFRASTRUCTURE DEVELOPMENT PVT. LTD., RVS HOSPITALITY DEVELOPMENT PVT. LTD., VANSUM INDUSTRIES AND THE MANJRI STUD FARM PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE-II [ 2014 (9) TMI 461 - CESTAT MUMBAI] , a Division Bench of the Mumbai Tribunal made the observations with regard to the security deposit towards the renting of immovable property, holding that In the absence of a provision in law providing for a notional addition to the value/price charged, the question of adding notional interest on the security deposit as a consideration received for the services rendered cannot be sustained. In view of the facts that department could not bring on record any clinching evidence that the deposit has influenced the service charges, the demand is not sustainable. The impugned orders are set aside - appeal allowed - decided in favor of appellant. - Service Tax Appeal No.13222 of 2014 and Service Tax Appeal No.13520 of 2014 - A/ 10338-10339 /2022 - Dated:- 12-4-2022 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-in-Original wherein the lower adjudicating authority confirmed the Service tax liability of the Appellant as mentioned above and also imposed the penalty under Section 76,77 and 78 of Act. Being aggrieved, the appeals were preferred before the Commissioner (Appeals) who vide above respective orders-in-appeal under challenge before him upheld the demand of Service tax and penalties under Section 77 and 78 of the Finance Act. Resultantly the appellant is before this Tribunal. 2. The learned counsel Shri Sudhanshu Bissa, learned counsel appearing for the Appellant submits that the impugned order passed by the Commissioner (Appeals) is erroneous because there cannot be any service tax demand on the refundable deposit. The Appellant kept the deposit of client s only as security in case if the client defaults in payment. Therefore, the deposit was only a security kept by the Appellant and no service tax could have been charged and levied on such security deposit. The Appellant during the proceedings has shown the evidence of the fact that the security amount kept by the appellant was refunded to the customers who had discounted the service provided by the Appellant. Thus, there bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be a further demand of Service tax on the same amount. This fact was also ignored by the Commissioner (Appeals) while relying upon the calculations given by the Adjudicating Authority. 2.4 He further submits that both the adjudicating authority have gone beyond the scope of the show cause notice as the SCN had proposed to recover tax on security deposits but the original adjudicating authority as well as the Commissioner (Appeals) have confirmed the demand on the basis of AMC charges which were waived by the Appellant. Thus, the order of the lower authorities are diagonally opposite to the issue involved in the show cause notice and therefore, service tax demand on such basis deserves to be set aside in the interest of Justice. 2.5 He also submits that demand is time barred and extended period of limitation cannot be invoked in the present case. 2.6 He also placed reliance on the following decisions in support of above submissions. M/s Dish TV India Ltd. Vs. Commissioner of Cus., C.Ex S.T., Noida- 2019(25)GSTL 68 (Tri. All) Samir Rajendra Shah Vs. Commissioner of Central Excise, Kolhapur 2015(37) STR 154 (Tri. Mumbai) M/s Murli Relators Pvt. Ltd. Vs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party which is not in the nature of consideration agreed upon by the parties, the same is not liable to be added to the value of service in terms of Section 67. Further, there is no deeming provision for increasing the value of consideration either in Section 67 or in the Service Tax (Determination of Value) Rules, 2006 framed thereunder. Here, the deposit is taken for a different purpose. Thus, the said deposit serves a different purpose altogether and it is not a consideration for providing service. The consideration for service is absent in the present case, therefore, what can be levied to Service Tax is only the consideration received for the service charged and no notional interest on the deposit taken can be levied to tax. There is no provision in Service Tax law for deeming notional interest on deposit taken as a consideration for providing the services. Therefore, in the absence of a provision in law providing for a notional addition to the value/price charged, the question of adding notional interest on the deposit amount as a consideration received for the services rendered does not arise. 4.2 We also find that Supreme Court in Commissioner of Service Tax v. M/s. Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notional interest accuring on the lump sum deposit received by the Appellant from the lessee. We find that such a stand is not justified particularly in view of the decision of the Tribunal in the case of Murli Relators Pvt. Ltd. (supra) cited by the Appellant in their support. The Tribunal observed as follows: 6.3 In the case before us, there is not even an iota of evidence adduced by the Revenue to show that the security deposit taken has influenced the price i.e. the rent in any way. In the absence of such evidence, it is not possible to conclude that the notional interest on the security deposit would form part of the rent. We also do not find any reason for adopting a rate of 18% per annum as rate of interest. Adoption of such an arbitrary rate militates against concept of valuation. In view of the foregoing, we hold that notional interest on interest free security deposit cannot be added to the rent agreed upon between the parties for the purpose of levy of service tax on renting of immovable property. (ii) In the case of Murli Realtors Private Limited Others. v. Commissioner of Central Excise, Pune-III [2015 (37) S.T.R. 618 (Tri. - Mumbai)], a Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to servicetax separately. We note that the said amount collected by the appellant from the flat owners is towards the security for the purpose of maintenance of the building and to cover the eventual default made by any of the flat owners for payment of monthly maintenance charges. As per the agreement with the flat owners, the said amount is liable to be refunded to them within the period of Six months from the date of termination of the said agreement. The Adjudicating Authority observed that the genuineness of the said term is very much doubted inasmuch as the appellant had not produced any evidence to show that the said IFMS was ever refunded to anyone. We really fail to understand the said reasoning of the Adjudicating Authority. The amount is refundable in case of termination of the ownership agreement and if no such termination has taken place till date, the amount would not be refunded. As long as the provisions for refund of the said amount in the agreement itself is there, it has to be considered that the said amount is refundable and was towards security deposits and was not for the purpose of providing any services, so as to levy tax on the same. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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