2018 (9) TMI 1722 - AT - Service Tax

Tribunal remands Renting Service demand, upholds Consultancy Service, sets aside Real Estate and Business Auxiliary Services demands. Cenvat credit disallowance overturned. Penalties cancelled.

M/s. RATTHA HOLDING CO. PVT. LTD. Versus COMMISSIONER OF CENTRAL SERVICE TAX, CHENNAI

The Tribunal remanded the demand under 'Renting of Immovable Property Service' for reconsideration. The demand under 'Management or Business Consultancy ... Renting of Immovable Property Service - Rents Received by the appellants after 01.06.2007 - Held that:- If the amount includes rents pertaining to the period prior to 01.06.2007, it can be easily verified by looking into the payments received by the appellants after 01.06.2007 - appellants have to be given one further chance to establish this plea raised by them - the issue is remanded to the adjudicating authority for re-consideration. Real Estate Agents Service - demand has been defended by the appellants saying that the transaction does not involve any activity which attracts “Real Estate Agents Service” - Held that:- The appellants have paid Income-tax on Capital Gains for the amount received from M/s. CCCL. Thus, it can be seen that it is a transfer of right/interest in property by the appellants to purchaser M/s. CCCL. The said transaction cannot in any way take the colour of “Real Estate Agents Service” - demand set aside. Business Auxiliary Service - sale of shares by appellants to M/s. M/s. Rattha Citadels OMR Apart Hotel Pvts Ltd. - main ground for alleging that the transaction would fall within the “Business Auxiliary Service” is that the shares of face value of ₹ 10/- has been sold by the appellants at a premium of ₹ 21.80/- per share, when the company was reeling under financial loss - Held that:- Whatever be the circumstances under which the shares were sold or the premium of the shares was fixed between the parties, the transaction of sale of share in no way can be considered as an activity promoting the business of the purchaser of the shares. It is indeed Sale of Shares and, therefore, the demand on this count cannot sustain - demand set aside. Input tax credit - input services used in the construction of buildings - denial on account of nexus - Held that:- This issue has been settled in the case of M/s. Sai Samhmita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] where the Hon'ble High court in the said decision held that the credit of input services used for setting up a warehouse for providing the Output Service of “Storage and Warehousing Services”, was admissible - disallowance of credit of input service used for Construction of buildings is unjustified. Appeal allowed in part and part matter remanded. Issues Involved:1. Demand under 'Renting of Immovable Property Service'2. Demand under 'Real Estate Agents Service'3. Demand under 'Business Auxiliary Service'4. Demand under 'Management or Business Consultancy Services'5. Disallowance of Cenvat credit on input servicesDetailed Analysis:1. Demand under 'Renting of Immovable Property Service':The appellants argued that the demand included rent for periods before 01.06.2007, which should not be taxable as the service became taxable only from 01.06.2007. The Commissioner did not accept this contention, stating that the documents provided did not establish that the demand included pre-01.06.2007 rent. The Tribunal decided to remand this issue to the adjudicating authority for reconsideration, allowing the appellants another chance to produce necessary details.2. Demand under 'Real Estate Agents Service':The appellants contended that the transaction in question was a relinquishment of property rights and not a service under 'Real Estate Agents Service.' They had entered into an agreement to purchase property and later relinquished their rights in favor of another company, receiving a substantial amount. The Tribunal found that this transaction did not involve any service element and was merely a transfer of property rights. Consequently, the demand under 'Real Estate Agents Service' was set aside.3. Demand under 'Business Auxiliary Service':The department alleged that the sale of shares by the appellants constituted a service under 'Business Auxiliary Service.' The appellants argued that this was a simple sale of shares, on which they had paid capital gains tax. The Tribunal agreed with the appellants, stating that the sale of shares did not amount to promoting the business of the purchaser and thus did not fall under 'Business Auxiliary Service.' The demand on this count was set aside.4. Demand under 'Management or Business Consultancy Services':The appellants did not contest the demand of Rs. 18,64,194 under 'Management or Business Consultancy Services.' Therefore, the Tribunal upheld this demand without further interference.5. Disallowance of Cenvat credit on input services:The appellants had availed Cenvat credit on input services used in constructing buildings intended for 'Renting of Immovable Property Service.' The department disallowed this credit, arguing that construction services do not qualify as input services for providing output services. The Tribunal referred to the High Court's decision in the case of M/s. Sai Samhmita Storages (P) Ltd., which allowed such credits. Following this precedent, the Tribunal set aside the disallowance of Cenvat credit, holding that the appellants were eligible for the credit.Conclusion:- The demand under 'Renting of Immovable Property Service' was remanded for reconsideration.- The demand under 'Management or Business Consultancy Services' was upheld.- The demands under 'Real Estate Agents Service' and 'Business Auxiliary Service' were set aside.- The disallowance of Cenvat credit on input services was set aside.- Penalties related to 'Real Estate Agents Service,' 'Business Auxiliary Service,' and wrongly availed Cenvat credit were consequently set aside.- The appeal was partly allowed with consequential reliefs and partly remanded.