2018 (9) TMI 828 - AT - Service Tax

Tribunal rules on taxation of security deposit interest, sets aside penalties, and approves cause title change.

M/s. Kochar Properties P. Ltd. Versus Commissioner of GST & Central Excise Chennai South Commissionerate

The Tribunal ruled in favor of the appellant regarding the inclusibility of interest accrued on security deposits in the value of taxable services for the ... Valuation - renting of immovable property service - inclusion of value of taxable services of interest accrued on security deposit paid in connection with renting of immovable property - Held that:- Tribunal in the case of K. Raheja Corporation Pvt. Ltd. Vs. CCE, Pune [2015 (2) TMI 886 - CESTAT MUMBAI] has held that interest accrued on such security deposit cannot be added to the renting agreed upon between the parties for the purpose of levy of service tax under the category of renting of immovable property - demand set aside. Penalties - Held that:- All the disputes being only interpretational, there cannot be any penalty and hence the penalties imposed in the impugned order under the Finance Act, 1994 are set aside. Appeal allowed in part. Issues involved:Inclusibility of value of taxable services of interest accrued on security deposit paid in connection with renting of immovable property; applicability of penalties under the Finance Act, 1994.Analysis:1. Inclusibility of interest accrued on security deposit in taxable services value:The judgment addresses the issue of whether the interest accrued on security deposit paid in connection with renting of immovable property should be included in the value of taxable services for the purpose of levy of service tax. The Tribunal, after considering the arguments presented by both sides, relied on previous decisions to rule in favor of the appellant. It cited the cases of K. Raheja Corporation Pvt. Ltd. Vs. CCE, Pune and Magarpatta Township Developers & Construction Co. Ltd., where it was held that interest accrued on such security deposits cannot be added to the renting agreement for the levy of service tax under the category of renting of immovable property. The Tribunal also mentioned the decision in Jain Construction Vs. CCE, Pune, which supported the same view. Consequently, the judgment concluded that the interest accrued on the security deposit should not be considered as part of the value for taxable service, and any orders stating otherwise were set aside.2. Penalties under the Finance Act, 1994:The judgment further addressed the issue of penalties imposed under the Finance Act, 1994. It clarified that since all the disputes were interpretational in nature, there should be no penalty imposed. Therefore, the penalties imposed in the impugned order were set aside, emphasizing that penalties were not warranted in this case. The judgment modified the impugned orders accordingly, allowing the appeals partly in favor of the appellant.3. Miscellaneous application for change of cause title:Additionally, the judgment mentioned the miscellaneous application filed by the Revenue for a change of cause title, which was allowed by the Tribunal. This procedural aspect was duly noted and approved by the Tribunal.In conclusion, the judgment provided a detailed analysis of the issues related to the inclusibility of interest accrued on security deposits in the value of taxable services and the applicability of penalties under the Finance Act, 1994. It relied on previous decisions to support its findings and ultimately ruled in favor of the appellant on the primary issue while setting aside penalties due to the interpretational nature of the disputes.