2024 (3) TMI 130 - AT - Service Tax

Service tax demand on Interest Free Maintenance Security and Lease Rent quashed due to procedural flaws and time-bar

M/s Supertech Realtors Pvt. Ltd. Versus Commissioner of Service Tax, Noida

The CESTAT Allahabad allowed the appeal challenging service tax demand on Interest Free Maintenance Security, Lease Rent and Capital Replacement Fund. The ... Levy of service tax - Interest Free maintenance Security (IFMS) - Lease Rent and Capital Replacement Fund - SCN issued only on the basis of audit objection without any further investigation in the matter - time limitation - HELD THAT:- The show cause notice has been issued only on the basis of audit objection without any further investigation or enquiry. Even the figure of amount received and the demand of service tax has been made on the basis of figures indicated in the audit objection. Revenue has not even cared to look and verify the correctness of these figures by examining the source documents. None of these documents are even relied upon by in the show cause notice. In case of SWASTIK TIN WORKS VERSUS COLLECTOR OF CENTRAL EXCISE, KANPUR [1986 (3) TMI 192 - CEGAT, NEW DELHI], it was held that we find that there is no evidence whatsoever that the goods that were actually cleared by the appellants were metal containers in unassembled form and not, as claimed by the appellants and already approved by the Department, in the shape of cut-to-size sheets meant for bottoms and bodies of metal cans. Though the demand can be set aside on this preliminary observation, it is found that demand is also not sustainable on the merits. Interest Free maintenance Security (IFMS) - HELD THAT:- It was held in the case of M/S KDP INFRASTRUCTURE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, GHAZIABAD [2018 (11) TMI 984 - CESTAT ALLAHABAD] that the security deposits collected by the Builder for providing maintenance to immovable property services would not be taxable under the category of ‘Management Maintenance or Repairs Services’. Lease Rent and Capital Replacement Fund - HELD THAT:- From the perusal of the extract of the audit report it is evident that in case of Lease Rent, appellant had taken categorical stand at the time of audit itself that this amount was to be transferred to NOIDA authority as such. This stand of the appellant has not been countered either in the show cause notice, order in original or order in appeal. This amount was not towards any service provided by the appellant. However without specifying the purpose of this amount both the lower authorities have concluded that this amount is towards, renting of immovable property service - Nothing has been stated in the above audit note in respect of the capital replacement fund. Even show cause notice do not specify anything in this respect. Assistant Commissioner have concluded that these services are classifiable are the category of Business Auxiliary Services and Commissioner (Appeal) do not specify under which taxable category he intends to classify the services provided by the appellant against this amount - Since impugned order upholds the order of the Assistant Commissioner, it is presumed that he agrees with the classification made by the original authority. However there are no basis in either of the order for classifying these services under this category. Appellant have already paid service tax on these amounts by classifying them under the category of Construction of Residential Complex Service after availing the abatement as provided by Notification No 29/2010-ST dated 22.06.2010. Time limitation - HELD THAT:- The audit of the unit was conducted on 04.12.2012, 05.12.2012 and 10.12.2012 and the audit report was issued on 05.04.2013. The show cause notice in this case has been issued to the appellant on 19.10.2016, without specifying any ground for invocation of extended period. When this show cause has been issued without any further investigation or enquiry then there can be no reason for invoking extended period of limitation from the date of audit. There are no merits in the impugned order - appeal allowed. Issues Involved:1. Non-payment of service tax on Interest Free Maintenance Security (IFMS).2. Non-payment of service tax on lease rent.3. Non-payment of service tax on Capital Replacement Fund.4. Application of extended period of limitation.Summary:Issue 1: Non-payment of service tax on IFMSThe appellant collected Rs. 52,38,309/- as IFMS from flat buyers during April 2011 to March 2012 but did not pay service tax. The revenue contended that this amount was part of taxable value under 'Management, Maintenance and Repair service' as per Section 65(105)(zzg) of the Finance Act, 1994. The appellant argued that IFMS was a security deposit and not consideration for any service. The tribunal observed that the amount was refundable, and there was no provision of service at the time of collection, thus no service tax was applicable. The tribunal referenced the case of KDP Infrastructure Pvt. Ltd [2019 (22) G.S.T.L. 450 (Tri. - All.)], which held that such security deposits are not taxable under the category of 'Management Maintenance or Repairs Services'. Consequently, the demand for service tax on IFMS was set aside.Issue 2: Non-payment of service tax on lease rentThe appellant received Rs. 2,70,76,858/- as lease rent from flat buyers but did not pay service tax, claiming it was to be passed to NOIDA authority. The revenue classified this under 'Renting of Immovable Property Services'. However, the tribunal found no basis for this classification and noted that the amount was not for any service provided by the appellant. The tribunal concluded that the demand for service tax on lease rent was not maintainable.Issue 3: Non-payment of service tax on Capital Replacement FundThe appellant collected Rs. 78,57,408/- as Capital Replacement Fund but did not pay service tax. The Assistant Commissioner classified this under 'Business Auxiliary Services', while the Commissioner (Appeal) did not specify a category. The tribunal found no basis for this classification and noted that the appellant had already paid service tax on these amounts under 'Construction of Residential Complex Service' after availing abatement as per Notification No. 29/2010-ST dated 22.06.2010. The demand for service tax on the Capital Replacement Fund was set aside.Issue 4: Application of extended period of limitationThe audit was conducted in December 2012, and the report was issued in April 2013. The show cause notice was issued on 19.10.2016, without specifying grounds for invoking the extended period. The tribunal noted that the show cause notice was based solely on audit objections without further investigation, rendering the invocation of the extended period unjustifiable.ConclusionThe tribunal found no merits in the impugned order and allowed the appeal, setting aside the demands for service tax on IFMS, lease rent, and Capital Replacement Fund. The application of the extended period of limitation was also deemed unjustifiable. The appeal was allowed, and the impugned order was upheld.