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BRIEF FACTS OF THE CASE :-
M/s K. B. Mall Management Company Limited, FP No. 22/22, TPS-18, Kankaria Road, O/s Raipur Gate, Behrampura, Ahmedabad – 380 022 (hereinafter referred to as “M/s K B Mall ”) is engaged in providing “Management, Maintenance and Repair Service”, and “Renting of immovable Property Service” which are taxable services as defined under sub Clause (zzg) and (zzzz) respectively of Clause 105 of Section 65 of the Finance Act, 1994. The said assessee is registered with the Service Tax Department under the above two service categories and holds Service Tax Registration No.AACCK4083AST001 under Section 69 of the Finance Act, 1994.
2. M/s K B Mall had filed ST-3 returns for the period April, 2011 to September, 2011. During the scrutiny of the said ST-3 returns, it was noticed that:
(i) M/s K. B. Mall has made following remark
“Following the injunction granted by the Honourable Gujarat High Court and Supreme Court. The Company has not taken service tax on rent as liability”.
In this regard, the department had also filed an appeal before the Apex Court against the judgment of Delhi High Court in the matter of Home Solution Retail India Ltd. and Ors. Vs. UOI (2009-PIOI-196-HC-DEL-ST). The said matter came up for hearing before the Supreme Court on 4.2.2011. The Hon’ble Supreme Court has passed an order to the effect that the High Court of Delhi will hear and dispose of all the writ petitions as expeditiously as possible. Further, the Supreme Court has ordered that the interim order which was passed by the Supreme Court on 10.01.2011 would continue to operate till the disposal of the writ petitions in the High Court. In effect, the interim order, dated 18.05.2010, passed by the Delhi High Court (post amendments), staying the levy of service tax on renting of immovable property has been nullified.
(ii) M/s K. B. Mall has declared receipt of Rs.6,54,25,992/- for the period from April-2011 to September-2011 against service provided by them under the category of “Renting of Immovable Property Service” but has not paid service tax on the said amount. This has resulted in non payment of Service Tax amounting to Rs.67,38,875/-(Including cess).
3. Government had introduced a levy of service tax on “Renting of immovable Property Service” vide Notification No. 24/2007 dated 22.05.2007 which came into effect from 01.06.2007 and tax is leviable under sub-clause (zzzz) of clause 105 of Section 65 of the Finance Act, 1994.
3.1 Section 65(105)(zzzz) of the Finance Act, 1994 defined the term taxable service for renting of property services as under:
“Taxable service means any service provided or to be provided to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce.”
Explanation 1- For the purposes of this sub-clause, “immovable property” included-
(i) building and part of a building, and the land appurtenant thereto;
(ii) land incidental to the use of such building or part of a building;
(iii) the common or shared areas and facilities relating thereto; and
(iv) in case of a building located in complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,
but does not include-
(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
(c) land used for educational, sports, circus, entertainment and parking purposes; and
(d) building used solely for residential purposes and buildings used for the purpose of accommodation, includes hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
Explanation 2 - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;
4. The Finance Act, 2010 has amended the definition of the taxable service ‘Renting of immovable property’ [section 65 (105) (zzzz)] to the extent of following:
(i) to provide explicitly that the activity of ‘renting’ itself is a taxable service. This change has been given retrospective effect from 01.06.2007: and
(ii) to provide that renting of vacant land, where the agreement or contract between the lessor and lessee provides for undertaking construction of buildings or structures on such land for furtherance of business or commerce during the tenure of the lease, shall be subjected to service tax.
5. As per the provisions of the Finance Act, 1994 and rules made there under, M/s K B Mall was required to assess correct value for the service provided by them as well as to pay service tax on the amount received by them for rendering of ‘Renting of Immovable Property Service’ on due time as prescribed and to follow all the procedure laid down in the Act and Rules. From the above, it appeared that the said service defined under “Renting of Immovable property Service” under Section 65 (90a) of Chapter V of the Finance Act, 1994 and the service provided to various clients by the M/s K B Mall was taxable service as provided under Section 65(105)(zzzz) of the Finance Act, 1994.
6. In view of above, it appeared that M/s K B Mall was required to pay the service tax amounting to Rs.67,38,875/- on declared taxable amount of Rs 6,54,25,992/- but they failed to pay the same. Therefore, the service tax amount of Rs.67,38,875/- along with interest was to be demanded under the category of “Renting of Immovable Property Service” provided by them during the period from April- 2011 to September, 2011.
7. It appeared that M/s K B Mall had failed to pay service tax on the gross amount of renting received by them during the period from April, 2011 to September, 2011 with an intent to evade payment of service tax and therefore, service tax was required to be demanded/recovered from them under Section 73(1) of the Finance Act, 1994 read with Section 68 of the Finance Act, 1994.
8. From the facts mentioned in the above paras, it also appeared that M/s K B Mall had contravened the provision of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rule, 1994 in as much as they had failed to determine and pay the service tax as detailed in above forgoing paragraphs within stipulated time limit, Section 70 (1) of the Finance Act, 1994 read with Rule 7 of the Service Tax Rule, 1994 as amended from time to time in as much as they had failed to self – assess the Service Tax on the taxable value received by them from their clients during the said period.
9. Therefore a Show Cause Notice bearing F.No.STC/4-27/O&A/12-13 dated 19.10.2012 was issued to M/s K. B. Mall Management Company Limited, FP No. 22/22, TPS-18, Kankaria Road, O/s Raipur Gate, Behrampura, Ahmedabad by the Commissioner of Service Tax, Ahmedabad to show cause as to why:-
i. The amount of Service Tax of Rs.67,38,875/-, (as per Annexure ‘A’ attached) should not be demanded and recovered from them under Section 73(1) of the Finance Act, 1994 read with Section 68 of the Finance Act, 1994, as amended;
ii. Interest on the service tax amount as applicable should not be charged from them under Section 75 of the Finance Act, 1994, as amended;
iii. Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994, as amended for contravention of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994;
iv. Penalty should not be imposed upon them under Section 77(2) of the Finance Act, 1994, as amended for contravention of Section 70(1) of the Finance Act, 1994.
DEFENCE REPLY :-
10. M/s K B Mall filed defence reply to the show cause notice vide their letter dated ______wherein they have inter alia, stated that it is a limited company and registered under Service Tax net under the service category of “Renting of Immovable Property Services” having registration no. AACCK4083A ST001 ; that they filed ST – 3 returns for the period April 2011 to September 2011 on due dates ; that they declared total amount of Rs.6,54,25,992/- received by them as license fees for the said period under the category of Renting of Immovable property ; that they had not collected service tax from the licensees and filed in ST- 3 return, “Following the injunction granted by the Honorable Gujarat High Court and Supreme Court, the company has not taken service tax on rent as liability”.
11. That they are a group company of Pantaloons Retail (I) Limited and Future Value Retail Ltd. They are member of Retails Association of India. Delhi High Court in case of Retail Association of India has decided that service tax is not applicable on Renting of Immovable Property Service. Following the same the applicant has not collected service tax on license fee ; that Amendment has been introduced to section 65(105)(zzzz) by virtue of the Finance Act, 2010. The Finance Act, 2010 received the assent of the President on 11/05/2010. The aforesaid provision has been introduced with retrospective effect from 01/06/2007. The amendment introduced is that in place of words “in relation to renting of immovable property” substituted “by renting of immovable property or any other service in reaction to such renting” ; that the honorable apex court mentioned that “In the meantime, no coercive steps shall be taken against the said petitioners for recovery of arrears of service tax due on or before 30th September, 2011. We clarify that there is no stay of imposition of service tax under sub-clause (zzzz) of clause (105) of section 65 read with section 66 of the Finance Act, 1994 (as amended), insofar as the future liability towards service tax with effect from 1st October, 2011 is concerned.”
12. That the Honorable Supreme Court of India in case of Retailer Association of India V. Union of India & ORS ordered on 14-10-2011 as under:
(i) All members of the assessee association, namely, Retailers Association of India, who are before us, shall deposit with the concerned department 50% of the arrears towards the said tax within six months in three equated installments, on or before 1st November, 2011; 1st January, 2012 and 1st March, 2012;
(ii) For the balance 50% all the members shall furnish a solvent surety to the satisfaction of the jurisdictional Commissioner;
(iii) They shall file individual affidavits in this Court, within four weeks from today undertaking to pay balance arrears of service tax, stayed in terms of this order, as may be directed by this Court at the time of final disposal of the appeal and
(iv) The successful party in this appeal shall been titled to interest on the amount stayed by this Court at such rate as may be directed at the time of final disposal of the appeal.
13. That their tenant had paid 50% service tax and 50% as surety bonds at their own though SCN was not issued at relevant time ; that in support they have attached challans paid by Pantaloon Retail (India) Ltd. Letters submitted to the department by the party and the assessee as well intimating the payment of service tax liability for all the three installments and also attached the letters issued by Pantaloon Retail (India) Ltd. to the assessee informing the assessee about payment of service tax in view of order passed by the Apex Court on behalf of the assessee ; that they have granted right to use the premises to M/s. Pantaloon Retail (I) Limited. The assessee has given property for use by licenses and for that they have received license fees. The licensing of premises does not amount to rendering of any service. The assessee has collected license fees. For receiving such fees the assessee is not required to provide any service. In terms of clear language of the taxing entry of Renting of immovable property service as mentioned in facts, only service ‘in relation to’ Renting of Immovable property is taxable and taxing entry does not cover the renting out of immovable property by itself. Hence, where there is no service provided, service tax is not applicable ; that this position has been clearly laid down by the hon’ble Delhi High court in Home Solution Retail India Ltd. v. Union of India [2009 (237) E.L.T. 209 (Del.)] ; that retrospective amendment through the Finance Act, 2010 has been made in the definition of “Renting of Immovable Property Service” in such a way to levy service tax on the activity of Renting by substituting the word “By way of Renting of Immovable Property” instead of words, “in relation to Renting of Immovable property” which is effective from 01.06.2007 ; that amending the law retrospectively in such a way wherein taxability arises for earlier period which was not the case earlier is not correct. Retrospective amendment in the law to the disadvantage to the assessee is not constitutionally valid and unsustainable in law. The amendment being substantive in nature cannot be made applicable to a period prior to the date of amendment owing to the existence of an entirely different position in law ; that it is submitted that the amendment to the definition of the taxable service was made under section 76(A)(6)(h)(i) and section 77, which sought to reintroduce Service Tax on renting of immovable property from retrospective date i.e. from 01.06.2007 and also validating all the actions taken or to be taken commencing on and from 01.06.2007, and thereby provided the liberty to TRU to make all the recoveries of service tax with interest and penalty or fine along with other charges as though the amended provision stood incorporated from 01.06.2007. it is submitted that it is a burden on the assessee. Reliance is placed on the following case laws