Service tax cannot be levied on miscellaneous income
Chennai Bench of CESTAT overturns service tax demand citing interpretative nature of the issue and absence of consideration for renting services
In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai Regional Bench has delivered a judgment in favor of M/s. PVP Corporate Parks Pvt. Ltd., setting aside the service tax demands and penalties imposed by the Commissioner of Service Tax (Appeals-I), Chennai. The case revolved around the applicability of service tax on miscellaneous income arising from book adjustments and refundable security deposits, which the tribunal ruled were not considerations for renting of immovable property services.
The tribunal, comprising Mr. P. Dinesha, Member (Judicial), and Mr. Vasa Seshagiri Rao, Member (Technical), concluded that service tax could not be levied on miscellaneous income shown in financial records, as these did not equate to consideration for renting services. The judgment emphasized that items such as electricity deposits and refundable security deposits were not related to the core service of renting immovable property, thus falling outside the ambit of service tax under Section 67 of the Finance Act, 1994.
The tribunal also addressed the issue of invoking the extended period of limitation under Section 73 of the Finance Act, 1994, which had been applied by the Revenue to demand service tax. It highlighted the interpretative nature of the issue, reinforced by judicial precedents and retrospective amendments, which negated the application of the extended period. The ruling underscored that mere non-payment of tax does not inherently imply willful suppression or misstatement of facts, drawing from established legal precedents such as Cosmic Dye Chemical v. Collector of Central Excise and Uniworth Textiles v. Commissioner of Central Excise.
The case was initially brought before the tribunal by PVP Corporate Parks Pvt. Ltd., represented by Advocate Ms. Sanchita S., challenging the order passed by the Commissioner (Appeals) which upheld the service tax demand and penalties. The tribunal's decision now provides significant relief to the appellant, allowing the appeal with consequential relief as per law.
The judgment is expected to have a broader impact on similar disputes concerning service tax applicability on miscellaneous incomes and deposits, establishing a clear precedent for entities engaged in renting immovable property services.
Bottom Line:
Service tax cannot be levied on miscellaneous income arising from book adjustments or refundable security deposits, as they do not constitute consideration for renting of immovable property services. Extended period of limitation under the Finance Act, 1994 cannot be invoked when the issue is interpretative in nature.
Statutory provision(s): Finance Act, 1994 Section 67 and 74
