TMI Blog2022 (7) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... refundable deposit and as such the amounts cannot be treated as consideration for renting/leasing of immovable property services. Tribunal in the case of SAMIR RAJENDRA SHAH VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR [ 2014 (11) TMI 499 - CESTAT MUMBAI] , it was held that As per the agreement, the Service Tax is payable separately by the lessee. As the appellant has not recovered Service Tax from the lessee, they may recover separately. Therefore, the contention of the appellant as they have not recovered the Service Tax from the lessee, the rent recovered by them be treated as cum-Service Tax is not acceptable. Thus, the demand of service on security deposit cannot be sustained and is thus set aside. Demand of service tax on reimbursement of expenses of diesel, water and electricity from the customers - HELD THAT:- The issue of inclusion of reimbursements in the consideration for value of services was dealt by Hon ble Supreme Court in the case of Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. [ 2018 (3) TMI 357 - SUPREME COURT] and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 was held to be ultra vires the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-7-2022 - SHRI P. K.CHOUDHARY, MEMBER(JUDICIAL) AND SHRI P.V.SUBBA RAO, MEMBER(TECHNICAL) Shri S.Tirumalai, Advocate for the Appellant (s) Shri A. Rangadham Shri C. Mallikarjun Reddy, both Authorized Representative for the Respondent (s) ORDER M/s. VITP Pvt.Ltd. (hereinafter referred to as the Appellant) is presently engaged in the business of development of IT Parks and such other industrial and commercial places which are subsequently given on rent to a wide spectrum of industries. 2. The facts of the case in brief are that the Service Tax Audit was conducted by the audit team led by the Superintendent, Service Tax, Group-VII, Hyderabad-IV Commissionerate covering the transactions of the Appellant. The disputes arising in all the four Appeals pertain to the period from June 2007 to June 2013 and some issues are common in these Appeals. Hence all the four Appeals are taken up together and are being disposed by this common order. For better appreciation of facts, a table has been reproduced below which shows the issues before us in details in each of the Appeal:- Sl. No. Particulars Appeal de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city and diesel charges under the category of Management, Maintenance or Repair Services . (c) Denial of Cenvat Credit on the input services used for construction of immovable property. (d) Denial of Cenvat credit on the input services used for promoting their premises for better lease opportunities. (e) Service Tax has been demanded on the termination charges collected from the tenants for pre-mature termination of the lease deed. 4. The Appellant has claimed in the grounds of Appeal as regards the taxability of Security Deposit received by them that the Security Deposit is collected by them which is refundable deposits and are returned to the respective tenants at the time of termination of the lease and no service is rendered in relation to the receipt of the Security Deposit. They have relied upon the provisions of Section 67 of the Finance Act 1994 for the term, the value of taxable service would mean that the gross amount charged by a service provider for the taxable services rendered or to be rendered and also relies upon the clarification given by the CBEC as regards the same. It is the submission of the Appellant that when no taxable service is being rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, Maintenance or Repair Services . As per Notification No.12/2003-Service Tax dated June 20, 2003, deduction is available for the value of the goods and the materials sold by the service provider to the service recipient during the course of providing the service and the remaining sum will be chargeable to Service Tax at 12.24%, subject to the condition that there is documentary proof specifically indicating the value of the aforesaid goods and materials. Reliance is placed on the case of Safety Retreading Co. (P) Ltd. v. CCE, Salem [2017 (48) STR 97 (SC)]. There is no finding in the present case that the said notification is not applicable to the facts of the Appellant s case when diesel is a good (commodity), used in the DG set. 7. The Appellant also places reliance on the case of Ganpati Associates v. Commissioner of Central Excise Central Goods and Service Tax, Jaipur [2019 (5) TMI 1233 CESTAT New Delhi which supports the above position and is favourable to the present facts in the Appellant s case at hand. 8. Thereby, since the Appellant is merely collecting these charges on actuals as a landlord from the tenants and making payments to service providers, it is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L-549-CESTAT-DEL] and also the judgement of Hon ble High Court of Madras in the case of CGST CX, Chennai v. Dymos India Automotive Pvt. Ltd. [2019 (365) ELT 26 (Mad.)]. 12. Further as regards Appeal III, the department has levied service tax on the termination charges collected by the Appellant from the customers for early termination of the lease agreement under the category of renting of immovable property services for the period April 2010 to September 2012. The contention of the Appellants Advocate in this regard is that the said charges have not been collected towards the services of renting of immovable property service and it cannot be added for valuation of service tax purposes under the said service head. It is further contended that prior to 01.07.2012, to levy service tax it has to be classified as a distinct category of service and there is no classification under the Finance Act, 1994 to tax such receipt of money for termination of lease agreement. 13. The Ld. Authorized Representatives for the department reiterated the findings of the lower authorities to confirm the demand. 14. Heard both sides through video conferencing and perused the appeal records. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax from the lessee, they may recover separately. Therefore, the contention of the appellant as they have not recovered the Service Tax from the lessee, the rent recovered by them be treated as cum-Service Tax is not acceptable. In these circumstances, we hold that the rent received by the appellant shall be treated as gross value of taxable service and on the said amount the appellant is required to pay Service Tax. 17. We also find that the Tribunal in the case of ELECTRONICS TECHNOLOGY PARK Versus COMMISSIONER OF CUS., C. EX. S.T., TRIVANDRUM [2022 (56) G.S.T.L. 182 (Tri. - Bang.)] has also held on similar lines as follows :- 6.4 Coming to issue No. 3, whether notional interest on refundable deposits can be included in the value of taxable supply for levy of service tax, we find that lease rental was the consideration for renting of premises and the security deposit was in the nature of security against default in payment of lease rental, damage to building, fitting, fixtures etc. We do not find any nexus between renting of premises, the prescribed lease rental and the security deposit. In fact, security deposit amount is refunded on termination of lease a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city reimbursements have been dropped and has been accepted by the department also as no further appeal has been preferred against the said order dated 20.03.2015. 21. In the case at hand, the fact that the expenses are mere reimbursement based on total cost incurred by the Appellant and the total floor area of the customers is not in dispute which goes to show that there is no profit element involved in the above reimbursements. The department has not been able to contradict the above fact either. Hence, having regard to the judgment of the Hon ble Supreme Court (supra) we find that the Appellant cannot be saddled with the liability on such reimbursements on account of water, electricity and diesel charges and thus the demand of service tax on this ground cannot be sustained either and is thereby quashed. 22. Next, as regards the third issue of service tax on termination charges, we find that the Ld. Adjudicating authority has totally misinterpreted the reasons for such collection and linked it with the rental income of the Appellant which in our considered view cannot be a good position to hold. We find that there was no service rendered by the Appellant towards such charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank, used - (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; (B) motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act; ************ (k) input means - (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activity of renting out the premises and as the inputs, input services and capital goods on which Cenvat credit has been availed by the appellant had been used for construction of the immovable property on which no service tax was leviable, the appellant would not be entitled to avail Cenvat credit on such input, input service and capital goods used for the construction of the immovable property. 16 . The issue as to whether the Cenvat credit availed for the construction of a Mall and subsequent renting has been considered time and again by the High Courts and the Tribunal. 17 . The Madras High Court in Dymos India Automotive examined whether Cenvat credit on commercial or industrial construction service can be utilized for payment of service tax on renting of immovable property and observed as follows :- 10. The Tribunal also referred to the decision in the case of CCE, Coimbatore v. Lakshmi Technology Engineering Indus Ltd. [reported in 2011 (23) S.T.R. 265 (Tri. - Chennai)] and also the decision in the case of Navaratna S.G. Highway Property Private Limited v. CST [reported in 2012 (28) S.T.R. 166 (Tri. - Ahmd.)] and held that without constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court examined whether emergence of immovable structure at intermediate stage is a criterion for denial of Cenvat credit. After referring to the decision of the Andhra Pradesh High Court in Sai Sahmita Storages, the Delhi High Court observed :- 71. Sai Sahmita Storages (P) Limited, is, in our opinion, a decision that held that a plain reading of the definition of Rule 2(k) would demonstrate that all goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT Credit. 72. In the present case, it is not in dispute that the appellant is a taxable service provider providing passive telecommunication service. Therefore, the assessee is entitled for input credit on the weight of judicial authority discussed above. It is also clear that several High Courts in different contexts have taken a view that credit of excise duty and service tax paid would be available irrespective of the fact that inputs and input services were used for creation of an immovable property at the intermediate stage, if it was ultimately used in relation to provision of output service or manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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