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 service tax. The appellant's stay application was not granted in full, with the Tribunal directing the appellant to pay the service tax demanded within a specified period to ensure compliance and staying the rest of the demands subject to compliance.

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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.

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