2019 (9) TMI 667 - AT - Service Tax

Appellant granted service tax exemption, abatement, and penalty relief by Tribunal.

The Tribunal partially allowed the appellant's appeal, exempting them from service tax for the period August 2008 to June 2012, permitting a 40% abatement ... Renting of immovable property service - period August, 8/2008 to June, 6/2012 - eligibility for abatement of 40% in terms of notification no.26/2012 - service tax on letting out plant/machinery and fixtures to M/s. Mahindra Holidays & Resorts India Ltd. - Supply of tangible goods service - extended period of limitation - penalty u/s 77 and 78 of FA. HELD THAT:- The facts are akin to the ruling in the case of M/S JAI MAHAL HOTELS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [2014 (7) TMI 540 - CESTAT NEW DELHI], wherein it has been held that on true and fair construction of the provisions of Exclusionary Clause under Explanation I to Section 65(105) (zzzz) and in particular, sub-clause (d) thereof, it was held that renting of building used for the purpose of accommodation including hotels, meaning thereby renting of a building for a hotel is covered by the Exclusionary Clause and does not amount to an immovable property, falling within the ambit of taxable service. Accordingly, it is held that for the part of the disputed period August, 2008 to 30.06.2012, the appellant is not liable to service tax. For the period from 1.7.2012, the appellants have admittedly deposited the service tax and has not disputed their liability, subject to abatement. The appellant, as provided in Notification No.26/2012-ST, is entitled to abatement of 40% and is liable for service tax only on the balance receipt of 60% with respect to the lease rent of the hotel. Supply of Tangible goods service - demand of service tax - HELD THAT:- The amount received per annum is not wholly for supply of tangible goods, as the plant and machinery, which are embedded to the earth and the fixtures and fittings, which cannot be removed without cannibalising them, and their removal may destruct, is not classifiable as goods, as the same are immovable - the appellant shall not be liable to service tax under the category of SOTG on the goods which are present in the hotel premises, which are immovable in nature - this issue is remanded to the Adjudicating Authority for a re-determination. Penalties - HELD THAT:- The issue is wholly interpretational in nature. Further, the transaction is duly recorded in the books of accounts maintained in the ordinary course of business and thus, there is no contumacious conduct on the part of the appellant - Penalty u/s 77 and 78 set aside. Appeal allowed in part. Issues Involved:1. Liability for service tax on renting of immovable property for the period August 2008 to June 2012.2. Eligibility for abatement of 40% w.e.f. 01.07.2012.3. Liability for service tax on letting out plant/machinery and fixtures under Supply of Tangible Goods Service (SOTGS).4. Invoking extended period of limitation.5. Imposition of penalty under Sections 77 and 78 of the Finance Act.6. Cross-appeal by revenue for enhancement of penalty under Section 78 of Finance Act.Detailed Analysis:1. Liability for Service Tax on Renting of Immovable Property (August 2008 to June 2012)The appellant argued that the buildings at Corbett and Naukuchiyatal were not covered under the definition of immovable property for service tax purposes until 30.06.2012. The definition under Section 65(105)(zzzz) excluded buildings used solely for residential purposes, including hotels. The Commissioner erroneously held that the presence of facilities like swimming pools, bars, and restaurants made the buildings commercial. However, these facilities were exclusively for hotel residents. The Tribunal referred to the CBEC circular and precedent rulings, concluding that the buildings used for hotels are excluded from service tax. Therefore, the appellant was not liable for service tax for the period August 2008 to June 2012.2. Eligibility for Abatement of 40% w.e.f. 01.07.2012The appellant claimed eligibility for a 40% abatement under Notification No.26/2012-ST. The Commissioner denied this, citing the appellant's failure to prove non-availment of Cenvat credit on inputs and capital goods. The Tribunal found that the show cause notice did not propose to disallow the abatement on these grounds and that the Commissioner had overstepped. The Tribunal allowed the abatement, making the appellant liable for service tax on only 60% of the lease rent.3. Liability for Service Tax on Letting Out Plant/Machinery and Fixtures under SOTGSThe appellant contended that the letting out of plant and machinery, which remained under the lessee's control, amounted to a deemed sale liable to VAT, not service tax. The Commissioner disagreed, stating that the effective control was not transferred. The Tribunal found that the plant and machinery embedded in the earth were immovable and not classifiable as goods. The Tribunal remanded the issue for re-determination, directing the appellant to provide details of movable and immovable goods for proper calculation of service tax.4. Invoking Extended Period of LimitationThe Tribunal found that the issue was interpretational and debatable, thus the extended period of limitation was not invokable. The transactions were recorded in the appellant's regular books of accounts.5. Imposition of Penalty under Sections 77 and 78 of the Finance ActGiven the interpretational nature of the issue and the absence of contumacious conduct, the Tribunal set aside the penalties under Sections 77 and 78.6. Cross-Appeal by Revenue for Enhancement of Penalty under Section 78 of Finance ActThe Tribunal rejected the Department's appeal for enhancement of the penalty, aligning with its findings that the penalties were not warranted.Conclusion:The Tribunal allowed the appellant's appeal in part, exempting them from service tax for the period August 2008 to June 2012, permitting the 40% abatement from 01.07.2012, and remanding the issue of SOTGS liability for re-determination. The penalties under Sections 77 and 78 were set aside, and the Department's cross-appeal for penalty enhancement was rejected.