TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 1131
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.... providing "Measurement Equipment" at the time of providing new gas connection to the customers but were not discharging service tax on the gas connection charges/ security deposit collected from the customers. Show cause notice covering the period April 2008 to March 2012 were issued and confirmed in adjudication. With effect from 01.04.2012, the assessee started paying service tax on gas connection charges but did not pay service tax on the security deposit collected from the customers. It was alleged that the service rendered would be taxable under the category of 'Supply of Tangible Goods' as defined under Section 65(105)(zzzzj) of the Finance Act, 1994 upto 30.06.2012 and with effect from 01.07.2012 would fall under the definition of service as defined under Section 66B read with Section 66D of the Act. The SCN dated 10.05.2014 was issued proposing the demand of service tax amounting to Rs. 2,32,11,908/- under Section 73(1) of the Act alongwith interest under Section 75 of the Act. It was also proposed the penalty under Section 70. In adjudication Ld. Commissioner vide impugned order dropped the demand of service tax. Being aggrieved, the Revenue is in appeal before this Tribu....
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....n done by the Adjudicating authority in the order impugned. 3.1 He also submits that it was beyond any doubt and dispute that the demand of tax involved in the impugned order was limited to the tax on security deposits and not the Gas connection charges. From the Annexure -A to statement, the Ld. Adjudicating authority had found, observed and contended in para 5.1 of the impugned order the dispute before her for adjudication was limited to tax on the security Deposits, the tax on gas connection charges were already discharged by the Respondent. In the light of above the decision taken by the Adjudicating authority suffered no factual infirmity and the agitation made by the revenue in the present matter deserve to be rejected. 3.2 He further submits that in para 4 and 5 of the grounds of appeal, the appellant has referred to certain terms and conditions of the sample agreement for supply of PNG and attempted to contend that the Security Deposit is not a deposit since it would not be refunded if the equipment is in a damaged condition. Appellant has completely failed to understand and appreciate the fundamental aspect concerning the security deposit and this is transpiring from the....
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....ssued by the Central Board of Excise and Customs which guides that "Returnable deposits is in the nature of security and hence do not represent consideration for services. Thus the security deposit which was intended to be refunded subject to the terms and conditions of the agreement between the parties did not constitute 'consideration' for 'such services' and accordingly it was not includable in the value of taxable services. He placed reliance on the following judgments:- * Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. -2018(3) TMI 357 * VITP Pvt. Ltd. Vs. CCT, Hyderabad -2022(7) TMI 1030 -CESTAT Hyderabad. * Marwadi Share and Finance Ltd. Vs. CCE- 2022(4) TMI 705-CESTAT AHMEDABAD. 4. We have considered the rival submissions of both the parties and perused the material on record. From the perusal of record we are very conscious that the Hon'ble Supreme Court in the appellant's own case held that the 'gas connection charges' for the customers of the appellant for providing "Measuring Equipment" is liable to service tax. However, in the present case the issue to be decided is whether security deposit is liable to service tax or otherwise. Therefo....
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.... manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service." 4.4 The perusal of this provision makes it clear that the taxable value is the amount of consideration (for providing the services whether mandatory or not mandatory form but the amount) charged by the service provider for the taxable service being provided by him. It also clarifies that if any benefit accrues to either of the parties whether to service provider or to service recipient which is not arising in lieu of taxable service, the same shall not be liable to be added to the valuation of services. We find that the Hon'ble Apex Court in the case of Moriroku UT India P. Ltd. v. State of U.P. reported in [2008 (224) E.L.T. 365 (S.C.)] while considering the value towards the provisions of services of renting of immovable property held tha....
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.... [2015 (37) S.T.R. 618 (Tri. - Mumbai)], a Division Bench of the Mumbai Tribunal made the following observations with regard to the security deposit towards the renting of immovable property and the observations are as follow :- "6.1 Section 67 of the Act, reproduced in para 4.1 above, clearly provides that only the consideration received in money for the service rendered is leviable to Service Tax. The consideration for renting of the immovable property is the amount agreed upon between the parties and on this amount the appellant is discharging Service Tax liability. The 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 deposit serves a different purpose altogether and it is not a consideration for leasing of the property. The consideration of the leasing of the property is the rent and, therefore, what can be levied to Service Tax is only the rent charged and no notional interest on the security deposit taken can be levied to tax. There is no provision in Service Tax law for deemi....
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....so as to levy tax on the same." 4.7 It is, therefore, clear from the aforesaid decisions that a security deposit for any length of time would not automatically became a taxable service in the hands of the respondent and that there is no provision in service tax law for taxing on a security deposit amount. 4.8 We also find that admittedly, the security deposit collected by the respondent is refundable at the time of termination of Gas supply agreement. Therefore, the said security deposit cannot form a part of service provided by the respondent. Therefore, on the said amount, Service Tax is not payable. We have also examined the copy of the agreement produced before us by the respondent. As per the agreement, after all dues are cleared and the meter and allied equipment have been removed in proper and undamaged working condition, the security deposit shall be refunded to the buyer. Clearly, the said security deposit amount is not a part of service which is provided by the respondent, hence not taxable. 4.9 As regard the Judgment of Apex court in the matter of Commissioner of Service tax, Ahmedabad Vs. Adani Gas Ltd. (Supra) relied upon by the revenue we find that the Hon'ble Supr....