2026 (4) TMI 211

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....ongwith interest and appropriate penalties. 2. The brief facts of the case are that the appellant was registered under Service Tax Department vide Reg. No. 52/ST/BFS/R-1/2004 and engaged in providing private locker services as defined in erstwhile section 65(12) read with section 65(105) (am) of the Finance Act, 1994. The lockers were given on hire by the appellant on payment of hire charges (locker rent) and deposit of refundable non interest security deposit. While locker rent was an income for appellant, security deposit was a current liability and disclosed as such only in books of accounts and financial statements (Balance Sheet) as non-interest bearing and refundable deposit. The Department formed a view that the appellant was not ....

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....ny facility by which an amount of money is lent or allowed to be used or retained on payment of interest or a discount. As per the Section 56D, interest on any amount retained would come under the ambit of negative list and no service tax would be chargeable on that. Therefore, in the instant case, interest on refundable security deposit in any form including notional interest if any would not be chargeable to service tax. She submitted that the appellant had never suppressed any information from the Department and submitted the information to the Department as and when demanded by the Department, as such, intention of the appellant was not to suppress the facts or evade the tax. Therefore, in the instant case, the proviso to section 73(1) ....

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....rtly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed 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. ....

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.... 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 deeming notional interest on security deposit taken as a consideration for leasing of the immovable property. Therefore, in the absence ....