AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 1030
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....13 and some issues are common in these Appeals. Hence all the four Appeals are taken up together and are being disposed by this common order. For better appreciation of facts, a table has been reproduced below which shows the issues before us in details in each of the Appeal:- Sl. No. Particulars Appeal details ST/27964/2013 (Appeal I) ST/20282/2014 (Appeal II) ST/21736/2014 (Appeal III) ST/21497/2015 (Appeal IV) 1. Period June 2007 to March 2011 April 2011 to September 2012 April 2010 to September 2012 October 2012 to June 2013 2. Demand INR 11,58,22,869 INR 4,34,55,505 INR 14,62,807 INR 45,86,180 (i) Security Deposit - INR 2,87,57,891 (ii) Reimbursement expenses-INR 6,70,02,785 (iii) Credit related to construction of immovable property INR 1,93,65,135 (iv) Credit on event management -INR 6,97,058 Security Deposit - INR 1,13,91,754 Reimbursement expenses - INR 3,20,63,751 Termination charges - INR 14,62,807 Reimbursement of Diesel charges - INR 45,85,180 3. SCN & OIO details SCN No.143/2012 dated 17 May 2012 (page 206) SCN No.29....
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....ble Property Services'. They have also relied upon the decision of the Hon'ble Supreme Court in the case of Association of Leasing & Financial Companies Vs. UOI [2010 (20) S.T.R. 417 (S.C.)] and the Tribunal's decision in the case of Futura Polyester Ltd. Vs. Commissioner of Central Excise, Chennai-I [2013 (29) S.T.R. 371 (Tri-Chennai)] 5. It is further submitted that the aforesaid deposit is refunded by the lessor i.e. the Appellant to the lessee on termination of the lease deed. As a measure of business prudence, the above venture amount is collected so that a certain security is available to the Appellant if the lessee is not able to pay the rent. This amount is refundable once the possession of the property has been handed over to the landlord and is interest-free. As regards the Service Tax liability on the amounts received on reimbursable towards the water, electricity and diesel charges, it is the submission of the Ld. Advocate that reimbursable expenses collected towards diesel charges are used for meeting the requirement of the Appellant and the tenants. Diesel is used to run the generator sets. Depending on the usage of the electricity by each tenant as per the install....
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..... Regarding reimbursable expenditure received towards water and electricity charges, it is submitted that the same are on account of actual charges incurred by the Appellant and cross-charged to the tenants on actuals based on the floor ratio. In respect of electricity charges, the Appellant submits that there is a common single meter installed by the electricity department for the entire complex. The Appellant had installed independent sub-meters for respective units to ascertain the electricity consumed by each tenant. Out of the total amount billed to the Appellant by the electricity department, the proportional amounts are charged back to the respective tenants depending on the electricity consumed by each tenant. The charges relating to the electricity used in the common space such as lobby, staircase etc. is incurred by the Appellant being landlord and the same is cross charged to the tenants based on the floor ratio. The Appellant also procures/purchases water from Andhra Pradesh Industrial Infrastructure Corporation (APIIC) and other sources and cross- charges the same to the tenants on the basis of the floor area occupied by each tenant. 10. It is further submitted that....
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....service tax on reimbursement of expenses from its customers on account of water, electricity and diesel expenses incurred for provision of services c. Applicability of service tax on termination charges collected from customers for early termination of lock in period of lease d. Eligibility of Cenvat credit of works contract services and other services for construction of immovable property and Cenvatcredit on event management services for promotion of business of the Appellant. 16. As regards the first issue of applicability of service tax on refundable security deposit collected by the Appellant from its customers, we find from the case records that it is not in dispute that the said amounts are collected as a refundable security deposit by the Appellant and the same is returned to the customers at the end of the lease period with no interest as per section 5 of the Lease Deed as submitted by the Appellant at Page 291 of the Appeal I. We find that the said amounts are not collected towards any provision of service but as a refundable deposit and as such the amounts cannot be treated as consideration for renting/leasing of immovable property services. We find ....
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.... has resulted in undervaluation of service of renting of immovable property and further there is no evidence of nexus between the two. This issue of inclusion of notional interest on refundable security deposit is settled issue now. We find that in the case of Murli Realtors Pvt. Ltd. cited supra, it was observed by the Tribunal that security deposit is taken for a different purpose altogether. It is to provide for a security in case of default in rent by the lessee or default in payment of utility charges or for damages if any caused to the leased property. Thus the security deposits serves a different purpose altogether and it is not a consideration for leasing of the property. Same ratio was followed in the case of Karnataka Industrial Areas Development Board cited supra. Hon'ble High Court of Bombay has held in the case of Commissioner of Income Tax v. J.K. Investors (Bombay) Ltd. [248 ITR 723 (Bom.)] that notional interest on security deposits should not be considered for the purpose of inclusion in actual rent. By following the ratios of the various decisions cited supra, we hold that notional interest on refundable deposit cannot be included in the value of taxable service f....
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....ct of renting. Also, it is on record that the department has considered the above amounts for termination charges also in the demand under security deposit above as these charges were adjusted with the deposit lying with the Appellant and thus on this score also, the demand cannot be sustained as it will lead to taxing the same amount twice. Hence we are in complete agreement with the point raised by the Appellants and the demand on account of termination charges is also liable to be quashed. 23. Lastly, as regards the issue of eligibility of Cenvat credit on input services used for construction of immovable property, we find that the period covered in the present appeals before us is June 2007 to March 2011 i.e. prior to the Cenvat credit Rules, 2004 which were amended w.e.f 01.04.2011. We find that the above issue is also now settled in favour of the Appellants by the judgment of the Principal Bench of the CESTAT, New Delhi in the case of REGENCY PARK PROPERTY MANAGEMENT SERVICES P. LTD. Versus COMMR. OF S.T., DELHI [2020 (41) G.S.T.L. 372 (Tri. - Del.)] wherein the Tribunal had held as under :- "11. The issue that arises for consideration in this appeal is as to whet....
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....sel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. - Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods; (l) "input service" means any service, - (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities rel....
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....eligible service for credit for providing output service of renting of immovable property. 11. In our considered view, the conclusion of the Tribunal is well founded, as construction service is an eligible service for credit for providing output service of renting of immovable property and without construction of the building, the renting of immovable property cannot be provided. We are also of the opinion that there is no error in the decision taken by the Tribunal." 18. The aforesaid decision of the Madras High Court makes reference to the decision of the Tribunal in Navaratna S.G. Highway. The said decision in Navaratna S.G. Highway, after placing reliance upon a decision of the Andhra Pradesh High Court in Sai Sahmita Storages, observed as follows :- "3.2 The definition of 'inputs' is limited to the definition of 'input services' as can be seen from the definition given above. Credit of duty paid on inputs is available when the inputs are used for providing an 'output service'. Therefore, there is a need to say that the inputs have been used for providing an 'output service'. In the case of 'input service', the definition includes input services used ....