Custom, Excise & Service Tax Tribunal
Singhal Premises Pvt Ltd vs Jaipur I.. on 12 September, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH,COURT NO. I
SERVICE TAX APPEAL NO. 50388 OF 2018
[Arising out of the Order-in-Appeal No. 425 (SM) ST/JPR/2017 dated
01.12.2017 passed by the Assistant Commissioner, Service Tax Division,
Jaipur.]
M/s Singhal Premises Pvt Ltd Appellant
2-TA-3, Jawahar Nagar,
Jaipur
vs
Commissioner, Central Excise, Respondent
Jaipur WITH SERVICE TAX APPEAL NO. 50577 OF 2018 [Arising out of the Order-in-Appeal No. 429-430(SM) ST/JPR/2017 01.12.2017 passed by the Assistant Commissioner, Service Tax Division, Jaipur.] M/s Starwood Realestate Pvt Ltd Appellant Plot No. F-2, Near MTS Tower, Amrapali Circle, Vaishali Nagar, Jaipur vs Commissioner, Central Goods & Respondent Service Tax, Jaipur WITH SERVICE TAX APPEAL NO. 50578 OF 2018 [Arising out of the Order-in-Appeal No. 426 (SM) ST/JPR/2017 dated 01.12.2017 passed by the Additional Commissioner, Central Excise Commissionerate, Jaipur-I] M/s Green Wonder Estate Pvt Ltd Appellant Plot No. 3, MTS Tower, Amrapali Circle, Vaishali Nagar, Jaipur vs Commissioner, Central Goods & Respondent Service Tax, Jaipur 2 ST/50388,50577,50578,50587/2018 AND SERVICE TAX APPEAL NO. 50587 OF 2018 [Arising out of the Order-in-Appeal No. 429-430(SM) ST/JPR/2017 01.12.2017 passed by the Assistant Commissioner, Service Tax Division-II, Jaipur.] M/s Starwood Realestate Pvt Ltd Appellant Plot No. F-2, Near MTS Tower, Amrapali Circle, Vaishali Nagar, Jaipur vs Commissioner, Central Goods & Respondent Service Tax, Jaipur Appearance Ms. Priyanka Goel, Advocate for the Appellants Shri S.K. Meena, Authorised Representative for the Department. CORAM :
HON'BLE SHRI JUSTICE DILIP GUPTA, PRESIDENT HON'BLE P.V. SUBBA RAO, MEMBER (TECHNICAL) Date of Hearing/ Decision: September 12, 2023 FINAL ORDER NO. 51314-51317/2023 JUSTICE DILIP GUPTA The issue that arises for consideration in all these four appeals is as to whether the Department could have charged service tax on the notional interest towards security deposit taken by the appellant against the rental property. It is not in dispute that the appellant has paid service tax on the amount of rent received by the appellant. The period involved in all the four appeal ranges from April, 2007 to September, 2012.
2. It transpires from the records of the appeals that the appellant had rented out immovable properties and apart from the rent on which service tax was paid by the appellant, the appellant 3 ST/50388,50577,50578,50587/2018 also collected interest fee security amount from the tenants, which amount was required to be refunded when tenants vacated the property.
3. The Department believed that the notional interest earned by the appellant on the said refundable deposit was liable to be included in the taxable value of the services provided by the appellant under section 67 of the Finance Act, 19941 and accordingly, four show cause notices were issued to the appellants. The appellants filed a detailed reply to all the four show cause notices contending that it was not liable to pay service tax on the notional interest calculated by the Department, as that would not be a consideration for the provision of a service. The reply filed by the appellants was not accepted by the department and the demands raised in the show cause notices were confirmed. Feeling aggrieved, the appellants filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) has dismissed all the appeals and upheld the order passed by the Adjudicating Authority.
4. Ms. Priynaka Goel, learned counsel appearing for the appellant has contended that the advances received by the appellants are in the shape of interest free security deposit and has no impact on the rental charges collected by the appellant. Thus, the amount of notional interest cannot be considered as a consideration. In support of this contention, learned counsel placed reliance upon the provisions of section 67 of the Finance Act as it stood at the relevant time, wherein consideration was 1 Finance Act 4 ST/50388,50577,50578,50587/2018 defined to include any amount that is payable for the taxable services provided or to be provided. Learned counsel also placed reliance upon a Division Bench decision of the Tribunal in Murli Realtors Pvt Ltd vs. Commissioner of Central Excise, Pune- III2.
5. Shri S.K. Meena, learned authorized representative appearing for the department has however supported the impugned order passed by the Commissioner (Appeals) and has submitted that it does not call for any interference in these appeals.
6. The submissions advanced by learned counsel for the appellant and the learned authorized representative appearing for the department have been considered.
7. Section 67 of the Finance Act, as stood at the relevant time, reads as follows:
"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; (ll) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration;
(iil) 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.
2 2015 (37) S.T.R. 618(Tri.-Bom) [16-07-2014] 5 ST/50388,50577,50578,50587/2018 (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed.
Explanation.-For the purposes of this section,-
(a) "consideration" includes any amount that is payable for the taxable services provided or to be provided;
(b) "money" includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value;
(c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and 1 book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise."
8. A Division Bench of this Tribunal in Murli Realtors, while examining a similar issue, observed as follows:
"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 deeming notional interest on security deposit taken as a consideration for leasing of the immovable property. Therefore, in the absence of a specific provision in law, as held by the Hon'ble Apex Court in the case of Moriroku UT India (P) Ltd. (supra), there is no scope for adding any notional interest to the value of taxable service rendered. Even in the excise law, under Rule 6 of the Valuation Rules, unless the department shows that the deposit taken has influenced the sale price, notional interest cannot be automatically included in the sale price for the purpose of levy. In the absence of a provision in law providing for a notional addition to the value/price charged, the question of adding notional interest on the security deposit as a consideration received for the services rendered cannot be sustained and we hold accordingly."
(emphasis supplied) 6 ST/50388,50577,50578,50587/2018
9. A perusal of the aforesaid decision of the Tribunal reveals that since the consideration for leasing of the property is rent, so what can be levied to service tax is only rent and notional interest on the security deposit cannot be subjected to levy of service tax.
10. In view of the aforesaid decision of the Tribunal, it has to be held that service tax could not have been levied on the notional interest calculated by the department on the interest fee security deposit collected by the appellant from tenants.
11. Such been the position, the orders impugned in the four orders passed by the Commissioner (Appeals) that have been assailed in the four appeals cannot be sustained and are set aside. The appeals are accordingly allowed.
(Order dictated in the open court) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) SB