TaxTMI 
TaxTMI 
2022 (2) TMI 1124
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....crores (Rs. 3 crores for State of Haryana and Rs. 2 crore for Himachal Pradesh) as the security deposit with said M/s. Khoday India Ltd. on which the later agreed to pay interest at the rate of 25% per annum on quarterly basis. 1.2 During the course of Audit conducted by the Audit officer of NOIDA Commissionerate, it was observed by the department that the appellants have received the interest amounting to Rs. 6,13,29,357/- during the year 2009-2010 to 2014-2015. Department formed an opinion that as per the provisions of Rule 3 of Service Tax (Determination of Value) Rues, 2006, the value of taxable service since includes the gross amount received for the taxable service, that the aforesaid amount of interest has to be included by the appellant in the gross value of the consideration received by it for providing the Business Auxiliary Services to M/s. Khoday India Ltd. With these observations that the Show Cause Notice No. 997 dated 02.03.2015 was served upon the appellant proposing the recovery of service tax amounting to Rs. 70,06,164/- upon the aforesaid amount of interest at the appropriate rate received by the appellant and the penalty in contravention of the relevant provi....
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....hat demand is liable to be set aside also for the reason that Show Cause Notice has wrongly invoked the extended period of limitation. It is submitted by the learned counsel that audit of appellant records was already conducted by the department for the period April 2009 to June 2012 in the year 2012 itself on and the same objection as that of present show cause notice was raised by the department. Hence all relevant facts were already in the notice of the department since the time of said Audit. Still the impugned show cause notice has been issued in the year 2015 after expiry of period of more than 3 years from the date of said audit. The Show Cause Notice has included the period with effect from 2009 itself. Hence the demand is more than 5 years old from the date of show cause notice. It is submitted that there is no evasion of duty by the appellant as far as his liability towards the Service Tax is concerned. Legally speaking the interest earned by the appellant has been an investment made by him by virtue of security deposit. The said security deposit was received by M/s. Khoday India Ltd. to ensure the viability of the credit worthiness of the appellant, hence can not be a co....
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....and appeal is prayed to be dismissed. 7. After hearing the parties and perusing the entire record, I observe and hold as follows: The appellants had entered into an agreement between M/s. Khoday India Ltd. to provide the Business Auxiliary Services, agreeing on being the sole agent to promote, distribute and sale of M/s. Khoday India Ltd. liquor in the States of Haryana and Himachal Pradesh. There is no dispute that vide the agreement dated 25.12.2009 was entered between the parties. There is no dispute that the appellant was receiving commission from M/s. Khoday India Ltd. for providing the said service being inclusive of Service Tax. Also there is no denial that the liability thereupon has regularly been discharged by the appellant. The dispute is the demand of service tax upon the money received by the appellant as the interest on the amount of security deposit made by the appellant with his service recipient i.e. M/s. Khoday India Ltd. The moot controversy to be adjudicated therefore is: whether the amount of interest so received should be included while calculating the gross value of amount of consideration received by the appellant for providing Business Auxili....
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....ically held that for the purpose of levy of Service Tax, it shall only be the amount accrued to service which shall be taxable, notional interest cannot be added to the value of such services. The Hon'ble Apex Court in that case also observed that security deposit which was received by the property owner shall be towards the recovery of damages, if any, cost of leased property hence the same cannot be included towards the provisions of any taxable service. In the decision as relied upon by the appellant i.e. V S T Industries (supra) also the Hon'ble Apex Court has held that the interest received when goods are sold on credit does not form part of the price on which the excise duty is payable. 9. We further observe that there has been amendment in section 67 wherein certain payments were excluded from the value of taxable service. 67(1) (viii) specifically exclude the interest on loans. Further there has been a Boards Circular No. 65/14/2013- ST dated 5.11.2003 which clarifies as follows: "2. ........Thus if a service provided is taxable, tax has to be paid on its value. Section 67 also clarifies value of service as the amount charged for the taxable service by the servi....
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....ked by M/s. Khoday India Ltd towards the correct worthiness of the appellants is duly acceptable, specifically when there is no evidence produced by the department to show the nexus between the said amount of deposit and the consideration towards the Business Auxiliary Services being provided by the appellants. We draw our support from the decision of Hon'ble Apex Court in the case of CCE Mumbai III vs. ISPL industries reported as [2003 (154) ELT 3(SC)]. 11. Accordingly we are of the opinion that the adjudicating authority has wrongly considered the interest received on security deposit as part of consideration received by appellant for providing the Business Auxiliary Service without establishing as to how the said security deposit is includable in the amount of consideration charged for the taxable value provided by the appellant M/s. Khoday India Ltd. This Tribunal, Mumbai Bench also in the case of Murli Realtors Pvt. Ltd. and others vs. CCE, Pune II reported as [2014-TIOL-1728-CESTAT-MUM] while relying upon the decision of Hon'ble Apex Court in the case of MorirokotUT India P Ltd. (supra) has held that there is no scope of adding any notional interest to the value of taxable....
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....ing provided by the appellant. The definition of consideration as mentioned in the explanation to section 67 further corroborates the said observations. It is held that the demand was proposed on mere basis of presumption and has been confirmed on a vague reasoning. Hence is liable to be set aside. 15. Coming to the another aspect of invoking the extended period of 5 years by the department instead of normal period of 18 months while issuing the Show cause notice, we hold that extended period can be the invoked by the department only if circumstances stipulated under proviso to section 73(1) of Finance Act 1994 are specifically existing. Thus the extended period can be invoked only when there is element of fraud or collusion or there is wilful intention for evading the payment of service tax or there has been suppression of relevant facts resulting into the evasion of duty. In the present case, it is observed that department had conducted the appellants audit in August 2012 also. Hence, the department had the knowledge about the activities of the appellant. There is no denial that the appellant has been filing its Service Tax returns regularly. The appellant has already been reg....