2019 (9) TMI 667 - AT - Service Tax

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

M/s Leisure Hotels Limited Versus Commissioner of Central Goods & Service Tax, Customs & Central Excise (Vice-Versa)

M/s Leisure Hotels Limited Versus Commissioner of Central Goods & Service Tax, Customs & Central Excise (Vice-Versa) - TMI 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.