TaxTMI 
TaxTMI 
2019 (7) TMI 9
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....ght lakhs sixty three thousand five hundred eighty three only). Penalty imposed under section 77 for failure to obtain service tax registration is reduced to Rs. 5000/- 9Rs Five Thousand only). The appeal of the Appellants is allowed in above terms and Order in Original No 30/ST/ADC/KOP/2012 dated 30.11.2012 stands modified to the extent as above." 2.1 Appellants entered into an agreement with M/s Sangli Sugars Pvt Ltd (Sangli) on 14.10.2009 and floated a Joint Venture under the name and style M/s Sangli Sugar and Mahakali Sakhar Udyog (JV) to run the sugar factory of the appellants on profit sharing basis for a period of three consecutive crushing seasons commencing from 2009-10 to 2011-12. JV worked during 2009-10 crushing season only and was terminated by both the parties on 20.05.2010. 2.2 As per para 5 of the deed of joint venture dated 14.10.2009, the Karkhana (Appellant) has authorized the joint venture to use its machinery/ building etc on payment of Rs. 5,50,00,000/- per annum as lease rent. Para 5, 6 & 12 of the agreement are reproduced below: "Para 5. That the party of first part i.e. Karkhana has allowed and authorized the joint venture to use its machine....
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....pense incurred should also be said to be paid by the JV to the Appellants against the lease rent due in terms of agreement dated 14.10.2009. 2.6 The services of renting of immovable property are taxable services as defined by Section 65 (105) (zzzz) read with Section 65 (90a) of the Finance Act, 1994. Appellants have provided the said services to JV for a consideration of agreed lease rent of Rs. 5,50,00,000/- against which they received an amount of Rs. 4,20,13,226/- (Rs. 3,29,59,430/- + Rs. 90,53,796/-). 2.7 Since appellants had not taken any registration for providing the said service and had not paid service tax on the lease rent received by them from JV, a show cause notice dated 03.02.2012 was issued to them asking them to show cause as to why-. i. "Service Tax amounting to Rs. 43,27,362/- (Service tax Rs. 42,01,323/- + Education Cess Rs. 84,026/- + Secondary and Higher Education Cess Rs. 42,013/- i n words Rs Forty Three Lakhs Twenty Seven Thousand Three Hundred and Sixty Two Only) as detailed in Annexure 'A' enclosed to this Show Cause cum demand Notice for providing taxable services of "Renting of Immovable Property Services" during the period from October 2....
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....every day, during which such failure continue, whichever is higher, starting with the first day after the due date till the date of actual compliance under Section 77(1) (a) of the Finance Act, 1994. The jurisdictional Deputy/ Assistant Commissioner shall take appropriate action for recovery of penalty. iv. I impose a Fees of Rs. 2000/- upon them under the Section 70 of the Finance Act, 1994, for failure to furnish ST-3 return. The jurisdictional Deputy/ Assistant Commissioner shall take appropriate action for recovery of penalty. v. I impose a penalty of Rs. 43,27,62 /- upon Shree Mahakali SSK Ltd Kavathe Mahankali, under the Section 78 of the Finance Act, 1994. However the penalty amount shall be reduced 25% i.e. Rs. 10,81,841 (Ten lakhs Eighty One Thousand Eight Hundred and Forty One only) if M/s Shree Mahakali SSK Ltd., pay the service tax amount of Rs. 43,27,362/- confirmed at para 27(1) along with interest as per para 27(ii) and such reduced penalty of Rs. 10,81,841/- within thirty days from the date of communication of this order." 2.9 Aggrieved by the order of Additional Commissioner, appellants filed appeal before the Commissioner (Appeals). The appeal....
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.... revenue has challenged the order of Commissioner (Appeals) stating thato • Claim that out of Rs. 3,29,59,340/- credited by the JV in the loan account of Appellant maintained with SDCCBL a sum of Rs. 28,75,972/- was towards repayment of advance paid to sugarcane harvesting and transport contractor, was never raised by the appellants during the course of investigation or in course of adjudication proceedings before the original adjudicating authority. • Appellant was the owner of plant and machinery and hence responsible for repair and maintenance of the plant, if required. However, in terms of para 12 of the agreement joint venture was required and have incurred the expenditure on repair and maintenance. Thus the rent of Rs. 5,50,00,000/- , was fixed with the consideration that expenditure on account of repair and maintenance will be incurred by the joint venture. Thus it becomes clearly evident that rent was not the sole consideration for lease in terms of Section 67 of the Finance Act, 1994. The money value of the expenses incurred towards repair and maintenance formed an additional consideration received and includable in the assessable value in terms o....
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.... • The SCN presumes and assumes that the loan repayment amount is rent amount though no rent is paid or received, the veracity is checked in various statutory record of different deptts. • The entire demand, penalty and interest is not sustatinable as neither rent is paid or received. The amount shown by the bank in letter clearly shows that it is paid against pre 14.10.2009 against Plant, machinery, Building etc are pledge hypothecation and other loans. • They rely on the following decisions to support their case on the ground that demand is hit by limitation: • Continental Foundation IT Venture [2007 (216) ELT 177 (SC)] • Escorts Ltd [2015 (319) ELT 406 (SC)] • Star Entertainment Pvt Ltd [2015 (329) ELT 50 (Bom)] • C Kamalakannan [2018 (18) GSTL 589 (Mad)] • Modi Sugar Mills Limited [12 STC 182] • Tahnee Heights Co Op Housing Society Ltd [2015 (40) STR 453 (Bom)] • Apsara CHSL [2016 (44) STR 303 (T-Mum)] • Federation of Surat Textile Traders Association [2017 (52) STR 478 (Guj)] 4.3 Arguing for the revenue learned Authorized Representat....
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....e Finance Act, 1994 the entire amount should be taken as the value of taxable services provided, and subjected to service tax. 5.1 We have considered the impugned order with the submissions made in the appeal and during the course of arguments. 5.2 The issue for consideration is whether the services provided by the appellant, by way of renting the factory with plant and machinery to JV as per the agreement dated 14.10.2009 will be taxable service under the taxable category "Renting of Immovable Property". Appellants have in their appeal memo themselves admitted that Commissioner (Appeal) have rightly appreciated the facts in respect of taxability under the category of "Renting of Immovable Property" (Para 19A of the Appeal Memo). However they are disputing the valuation of the Service for the purpose of determination of tax payable. They have stated that they have claimed certain deductions for determination of value of taxable services, which have been disallowed by the Commissioner (Appeal). 5.5 As per the agreement between the Appellants and 'JV' dated 14.10.2009, following is quite evident: i. Appellants entered into agreement with M/s Sangli Sugars Pvt Ltd, t....
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.... are caused to the functioning of Joint Venture by SDCCBL. (Clause 36) 5.6 From the above agreement it is quite evident that the Joint Venture has come into existence from the date of agreement i.e. 14.10.2009. The Appellant have rented out its machinery and building to the joint venture against payment of lease rent of Rs. 5.50 Crore per annum during the period of continuance of this agreement. The appellants are not entitled to receive any other amount except those specified in the agreement from the joint venture. Joint Venture is not responsible for any past or existing liabilities of the Appellant. 5.8 The value of taxable service provided has to be determined as per the provisions of Section 67 of Finance Act, 1994 read with the relevant rules made in-terms of that Section. The said section 67 ibid is reproduced below: "67. (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case....
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....ent was in force. 5.10 In terms of Rule 6 of the Service Tax Rules, 1994 as it existed then, the service tax was required to be paid on the amount received by the provider of the taxable service during the month for providing the said service irrespective of the amount charged by him from his client for the provision of service. The rule 6(1) is reproduced below: "6. Payment of service tax (1) The service tax shall be paid to the credit of the Central Government,- (i) by the 6th day of the month, if the duty is deposited electronically through internet banking; and (ii) by the 5th day of the month, in any other case, immediately following the calendar month in which the payments are received, towards the value of taxable services: Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the Central Government by the 5^th of the month immediately following the quarter in which the payments are received, towards the value of taxable services: Provided further that notwithstanding the time of receipt of payment towards the value of services....
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....sited by the JV in the different loan accounts of the Appellants with the Sangli DCC Bank Pvt. Ltd. and the amount of expenses of Rs. 90.53 lacs incurred by the JV for repair and maintenance of the plant and machinery totalling to Rs. 4.20 crores as the taxable value of service: In this regard the Appellants have contended that a major portion of the amounts deposited by the JV in the bank as reflected in the letter dated 4.8.20 11 of the bank was related to repayment of leans of the Appellants; the amount of Rs. 28,75, 972/- was related to sale of stores hypothecated to the bank by the Appellants to the JV; and another amount of Rs. 22,81;684/- deposited in the Temporary loan of the Appellants was received from the JV towards repayment of amount of advance paid to the sugarcane harvesting and transport contractors by the Appellants before the date of joint venture Agreement. Accordingly they contended that the Adjudicating Authority has erred in holding the total amount of Rs. 3.29 crores as receipt of rent and value of taxable service. As regards expenses of Rs. 90.53 lacs for repair and maintenance of machinery, they have submitted that expenditure being incurred by the JV and t....
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.... and various withdrawal letters issued to the JV evidencing the deductions made by the bank for repayment of loan amounts of the Appellants. I find that vide letter dated 27.11.2009, the bank had sanctioned. a loan limited to Rs. 40 crores as sugar pledge loan to the JV and vide withdrawal letters dated 3.12.2009, 22.12.2009, 8.1.2010, 20.1.2010, 4.2.2010, 3.3.2010 and 25.3.2010, while allowing the JV to withdraw amounts, the bank has deducted and deposited certain amounts in the loan accounts as mentioned in those letters. The summary of amounts deposited by the bank based on those letters when compared with the deposit. details received from the bank vide their letter dated 4.8.2011 works out as below. Accordingly I find that while allowing withdrawal of money from the loan sanctioned to the JV the bank has deducted certain amount and deposited the same in the loan accounts of the Appellants. (1) (2) (2) (3) S.No. Name of loan Account Amount deposited as per bank's letter dated 4.8.2011 Rs. in lacs Amounts deposited as per bank's letters issued since Dec. 2009 to March 2010 as mentioned in para 12.1 above. Rs. in lacs 1 Temporary Loan 121.67 ....
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....g against S.No.S 1,2 and 4 at Col. (4) of the table i.e. Rs.* 53.36 lacs (i.e Rs. 76.17 lacs minus Rs. 22.81 lacs as discussed in para 12.1 above), Rs. 56.4 lacs and Rs. 74._83 lacs] being deposited in their loan accounts is not a part of taxable value and only an amount of Rs. 93.441acs which is 011 account of the payment of Rs. 200/- per bag of sugar sold by the JV could be the taxable. value of the service provided by them, In this regard I find that the JV was liable to pay to Appellants as per the terms and conditions of the Agreement. According to Agreement the JV was liable to pay Rs. 5.5 crores per annum to Appellants. Beyond this amount the JV was liable to pay an amount of Rs. 5.28 crores to Sangli Sugars after which the profit was to be shared in the ratio of 51 :49 between Appellants and Sangli Sugars. The JV was not liable to pay any amount to Appellants other the above amount as per the Agreement. Therefore, any amount deducted by the bank from the loan 'amount of JV and deposited in the loan amount of Appellants has to be treated as amount paid by JV to Appellants and any amount paid by JV upto Rs. 5.5 crores has to be first apportioned towards the lease rent bec....
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.... am of the view that the findings of the Adjudicating Authority are based on assumption and the expenses of maintenance and repairs incurred by' the JV are not required to be added to the taxable value of the service provided by the Appellants. The Appellants are entitled to relief to this extent as there is nothing on record to evidence that the expenses incurred on maintenance and repair have, in any way, influenced the rent amount. 12.4. In view of the findings in para 12.1 to 12.3 above the taxable value on which the Appellants are liable to pay service tax comes to Rs. 278.03 lacs. The service tax liability of Appellants on this amount comes to Rs. 28,63,583/ - which the Appellants are liable to pay." 5.13 After considering the agreement dated 14.10.2009 we do not find any reasons to differ with the determination made by Commissioner (Appeals). As per the clause 19 of the agreement, the Joint Venture is not responsible for any past or existing liability of the appellant. The temporary loan, sugar pledge loan and revised restructuring loans are the liability of the appellant and cannot be termed as liability to be met by the Joint Venture. The payments made in t....
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....ner. 5.15 In terms of clause 12 of the agreement we are also not in agreement with the appeal filed by the revenue seeking to add the expenses incurred by the Joint Venture towards repair and maintenance of the machinery/ building in the payment made by the Joint Venture to the appellants. 5.15 On the issue of limitation appellants have relied upon number of decisions of various authorities to argue that their case is not covered by the proviso to Section 73(1) of the Finance Act, 1994, as they have not suppressed anything with the intention to evade payment of taxes. However they have failed to establish the relevance of these decisions in the facts and circumstances of this case. Commissioner appeal has discussed the issue for invocation of extended period of limitation in para 13 of his order reproduced below: "13. As regards limitation, the Appellants' contention is that there is no suppression of facts and they have' relied on the judgment of the Hon'ble Supreme Court in the case of Continental Foundation Jt. Venture versus Commr., C. Ex. Chandigarh - 2007 (216). ELT 177 (S.C.). In this regard I find that the Hon'ble Supreme Court .in the said ca....