2018 (1) TMI 114 - AT - Service Tax

Lease of Business Assets Deemed Taxable Service: Tribunal Upholds Service Tax, Requires Compliance

The Tribunal found that the lease of assets for business purposes constitutes taxable service under renting of immovable property service, subject to ... Renting of immovable property service - lease of land and building, plant and machinery for the use in the course of furtherance of business or commerce - Held that: - The lease amount received by the appellant appears to be prima facie for the leasing of the plant and machinery as well as land and building as a whole. It appears to us that such amount received is liable for service tax under the category of renting of immovable property service, since the amount has been received in furtherance of business. The appellant is directed to deposit the entire amount of service tax demanded within a period of eight weeks. Subject to the payment of service tax as above and compliance thereof, the rest of the demand made in the impugned order will remain stayed. Issues:1. Whether the lease of land, building, plant, and machinery for use in business constitutes taxable service under renting of immovable property service.2. Whether the appellant's stay application justifies a full stay of demands for service tax and penalties.Analysis:Issue 1:The appellant entered into a lease agreement with another party for a period of 30 years, receiving an amount towards lease rental. The Department contended that the lease of assets for business purposes falls under taxable service, subject to service tax as per Section 65(105)(zzzz) of the Finance Act, 1994. Proceedings were initiated against the appellant for non-payment of service tax, resulting in a demand of a specific amount along with penalties. The appellant challenged this order through an appeal and a stay application.Issue 2:In the stay application, the appellant sought a stay on the demand for service tax and penalties, citing reasons such as being a sick sugar factory unit, the lease rent being determined based on asset valuation, and the request to apportion the lease rent between plant and machinery and land and building for service tax calculation. However, during the proceedings, the appellant failed to appear before the Tribunal, leading to the Tribunal considering the matter based on available records. The Tribunal, after hearing the arguments from the Department, found that the lease amount received by the appellant was likely for the leasing of both plant and machinery and land and building as a whole, making it liable for service tax. The Tribunal noted that the attempt to split the lease amount between different assets seemed artificial and directed the appellant to deposit the entire service tax demanded within a specified period, while staying the rest of the demands subject to compliance.In conclusion, the Tribunal found that the appellant's stay application did not warrant a full stay of all demands, instructing the appellant to pay the service tax demanded within a stipulated timeframe to ensure compliance and stay of the remaining demands.