TMI Blog2024 (3) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... ed much before the 1st April 2008. The fact of taking the credit against these documents was reflected in ST-3 return and enclosed chart, filed with the range officer 20.10.2008. While acknowledging the said return, superintendent has observed on 23.10.2008 stating Defective ST-3 on account of CENVAT Credit in ST-3 of Transport of Goods . Thus it is evident that the fact that appellant had availed the CENVAT Credit while claiming the benefit of exemption under Notification No 6/2005-ST as amended during the Financial Year 2007-2008 was well in knowledge of the department. No ST-3 return for the period 2007-08 has been produced during the entire proceedings. The fact that appellant was availing the CENVAT Credit against the documents which are for the Financial Year 2007-08 was disclosed to the concerned jurisdictional officers while filing the ST-3 return for the period April 2008-September 2008 - No ground for alleging suppression has been brought forth in the show cause notice or in the orders of lower authorities. The show cause notice alleging the suppression and invoking extended period of limitation for making demand for the period 2006-07 is bad in law. The bonafide belief o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.06.2007. But the appellant did not take registration under this category nor discharged the service tax liability against these services provided by them. 2.3 Appellant claimed that undisputedly they were required to pay the service tax under the category of Renting of Immovable Property Services . However they were availing the benefit of exemption as per Notification No.6/2005-ST dated 01.03.2005 (as amended by Notification No.4/2007 dated 01.03.2007) as per which the gross receipts towards services up to Rs.8 lakhs was exempted subject to non-availment of cenvat credit. As per revenue since certain amounts were shown in the ST3 Return towards CENVAT Credit taken benefit of this exemption was not available. 2.4 A show cause notice dated 10.03.2011 was issued to the appellant asking them to show cause as to why,- 1. The total amount of Service Tax amounting to rs 1,27,357/- should not be demanded and recovered from them under Section 73(1) of the Finance Act, 1994; 2. Penalty should not be imposed on them under Section 7 78 of the Finance Act, 1994 3. The interest on Rs 1,27,357/- at applicable rates should not be demanded and recovered from them under Section 75 of the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the department on the said amount. Now, the question arises as to whether the simultaneous availment of exemption under the Notification No. 6/2005-ST, dt 01-03-2005 (as amended by Notification No. 4/2007-ST, dated 1-3-2007, w.e.f. 1-4-2007) and cenvat credit under Cenvat Credit Rules, 2004 are available to the appellants or not?. From the perusal of the case record, I find that the appellants have taken cenvat credit which has also been reflected in ST3 return filed by them for the period 04/2008 to 09/2008 andthat this fact has also been accepted by the appellants. They have mentioned in the grounds of appeals that the cenvat credit availed by them is related with the manufacturing unit and has nothing to do with the providing of output service. Further, they have submitted that the cenvat credit was not taken in respect of any input service. From the submission of the appellants, it is also not in dispute that the cenvat credit was taken by them. The appellants have claimed the exemption of Rs 8 lakhs under the Notification No. 6/2005-ST, dt 01-03-2005 (as amended by Notification No. 4/2007-ST, dated 1-3-2007 w.e.f. 1-4-2007) only on the ground that the cenvat credit was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Notification is reproduced below: G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not exceeding four lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act: Provided that nothing contained in this notification shall apply to,- (i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or (ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994. 2. The exemption contained in this notification shall apply subject to the following conditions, namely:- (i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transport agency, the payment received towards the gross amount charged by such goods transport agency under section 67 for which the person liable for paying service tax is as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall not be taken into account. Explanation.- For the purposes of this notification,- (A) brand name or trade name ; (B) aggregate value not exceeding four lakh rupees means the sum total of first consecutive payments received during a financial year towards the gross amount, as prescribed under section 67 of the said Finance Act, charged by the service provider towards taxable services till the aggregate amount of such payments is equal to four lakh rupees but does not include payments received towards such gross amount which are exempt from whole of service tax leviable thereon under section 66 of the said Finance Act under any other notification. 4.4 This notification was amended by the Notification No 4/2007-ST dated 01.03.2007 to increase the exemption limit from Rs 4,00,000/- to Rs 8,00,000/-. The text of the said notification is reproduced below : G.S.R. (E).- In exercise of the powers conferred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hart it is quite evident that the appellant had availed the CENVAT Credit in respect of certain documents, which were dated much before the 1st April 2008. The fact of taking the credit against these documents was reflected in ST-3 return and enclosed chart, filed with the range officer 20.10.2008. While acknowledging the said return, superintendent has observed on 23.10.2008 stating Defective ST-3 on account of CENVAT Credit .. in ST-3 of Transport of Goods . Thus it is evident that the fact that appellant had availed the CENVAT Credit while claiming the benefit of exemption under Notification No 6/2005-ST as amended during the Financial Year 2007-2008 was well in knowledge of the department. Appellant do not dispute that they were required to pay the service tax after crossing the exemption limit of Rs 8 lacs in the year 2007-08 and have discharged the service tax liability in respect of the same, a fact admitted in the show cause notice. appellant had in the ground of appeal, given the break up of the amount of service tax calculated with interest and paid by them: Period Amount Received Rs June 2007 to March 2008 10,08,000/- April 2008-August 2008 5,04,000/- Total Amount Receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the party cannot claim the benefit of bona fides as claimed by them and they are liable for penalty under Section 78 of the Finance Act, 1994 However, it is seen from the Show Cause Notice that the amount already paid by the party has not been taken in the demand amount and it appears that the said deposit of Rs. 96,903 has been taken to have been deposited under Section 73(3) of the Finance Act, 1994, and hence the penalty has nor been proposed against this amount. In this regard, I appropriate the said amount and absolve the party from imposition of any penalty with regard to the amount of Rs 96,903. already paid by the party before the issuance of the Show Cause Notice 4.8 However, the undersigned finds the party as guilty of contravention of Section 69 of the Finance Act 1994, read with Rule 4 and 6 of the Service Tax Rules, 1994, as they had neither got registered for providing services of commercial Renting of Immovable Property and evaded payment of service tax of Rs. 1,23,357 by suppressing the vital facts from the Department as already discussed. The party are, therefore, liable for an equal amount of penalty of Rs. 1,23,357 only under Section 78 of the Finance Act, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtherance of business or commerce is concerned, we are unable to discern any value addition. Consequently, the renting of immovable property for use in the course or furtherance of business of commerce by itself does not entail any value addition and, therefore, cannot be regarded as a service. Of course, if there is some other service, such as air conditioning service provided along with the renting of immovable property, then it would fall within Section 65(105)(zzzz). 36. In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside. Subsequently this decision was over-ruled in the case Home Solutions Retail (India) Ltd. [2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of business or commerce, it would come within the residuary power of the Parliament and the same should put the controversy to rest. 62. As presently advised, we shall dwell upon the concept of value addition. The hub of the matter is when a premise is let out for use, should a person who rents an immovable property or renders any other service in relation to such letting for use in the course or furtherance of business or commerce be liable to service tax. 63. The Division Bench in the first Home Solution case (supra), as we have reproduced hereinbefore, has opined that renting of immovable property for use in the course or furtherance of business or commerce by itself would not constitute service as there is no value addition. In the dictionary clause in Section 65(90A), while defining renting of immovable property, it has been stated that it includes renting, letting, leasing, licencing or other similar arrangements for immovable property for use in the course or furtherance of business or commerce. On a perusal of the decision in the first Home Solution case (supra), it is discernible that the Division Bench has not appositely adverted to the same. The contention that despite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that an element of value addition is involved and once there is a value addition, there is an element of service. 69. In view of our aforesaid analysis, we are disposed to think that the imposition of service tax under Section 65(105)(zzzz) read with Section 66 is not a tax on land and building which is under Entry 49 of List II. What is being taxed is an activity, and the activity denotes the letting or leasing with a purpose, and the purpose is fundamentally for commercial or business purpose and its furtherance. The concept has to be read in conjunction. As we have explained that service tax is associated with value addition as evolved by the judgments of the Apex Court, the submission that the base of the said decisions cannot be taken away by a statutory amendment need not be adverted to. Once there is a value addition and the element of service is involved, in conceptual essentiality, service tax gets attracted and the impost gets out of the purview of Entry 49 of List II of the Seventh Schedule of the Constitution and falls under the residuary entry, that is, Entry 97 of List I. 70. In view of our conclusion, the decision in the first Home Solution case does not lay down the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
