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PJ/Case Law/2013-14/2092

Whether allowing different brands to sale goods in retail stores leviable to service tax under BAS prior to introduction of Renting of immovable property service?

Case:- SHOPPERS STOP LTD Vs THE COMMISSIONER (TAR), MUMBAI

Citation:- 2014- TIOL-153-HC-MUM-ST

Brief  facts:- This appeal under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1983 (“the Act”) challenges the order dated 21 March 2013 passed by the Customs, Excise and Service Tax Appellate Tribunal (“the Tribunal”). The impugned order dated 21 March 2013 of the Tribunal, passed on application for dispensing with pre-deposit of duty and penalty, directed the appellant to pre deposit an amount of 50% of the service tax demand of Rs.3,44,45,034/. This deposit was a condition precedent for the purposes of entertaining the appellant's appeal before it, from the order dated 14 March 2012 of the Commissioner of Service Tax. At the request of the Counsel for the parties the appeal is being disposed of at the stage of admission. The appellant is in the business of operating and running of retail stores where goods of various brands are sold under one roof. The appellant grants concession to various concessionaires for display, demonstration and sale of the products in its retail stores. The consideration received by the appellant from the concessionaires is a percentage of the value of the goods sold subject to certain minimum amount. During the period from 1 May 2006 to 31 May 2007 the appellant received consideration of Rs. 2 ,78,68,505 /- from various concessionaires. However, no service tax was paid as according to the appellant the above activity was not chargeable to service tax. On 1 June 2007 a new taxable service viz .. “Renting of immovable property” was included into the Act. Immediately on the introduction of the above entry, the appellant commenced discharging service tax on its aforesaid activities under the category “renting of immovable property”. The revenue has been accepting the service tax paid by the appellant on the aforesaid service under the head “renting of immovable property” till date. In the meantime on 22 October 2009, a show cause notice was issued to the appellant demanding service tax of Rs. 3,44,45,034/- along with interest thereon in respect of services rendered under the category of business support services for the period 1 May 2006 to 31 May 2007. The Commissioner of Service tax by an order dated 14 March 2012 adjudicated upon the show cause notice and confirmed the demand of Rs. 3,44,45,034/- along with interest thereon and equivalent penalty. Being aggrieved the appellant filed an appeal before the Tribunal along with an application for dispensing the pre deposit of service tax and penalty under the proviso to Section 35F of the Central Excise Act read with Section 83 of the Act. The Tribunal by the impugned order has directed a deposit of 50% of the service tax demand on a prima facie view that the appellant provides various facilities which could be categorized as infrastructure facilities to its concessionaires and these services were in the nature of services classifiable as business support service. The primary contention of the appellant that its transaction with the concessionaires was one of purchase and sale and therefore not service, was negatived by the impugned order holding that on the same service subsequent to 1 June 2007 the appellant have themselves been paying service tax. So far as question of time bar was concerned, the Tribunal did not go into the same on the ground that it would be gone into in detail at the time of final hearing.
 
Appellant’s contention:-  The appellant submits that in the present facts a complete waiver of pre-deposit is called for as on identical facts this Court in its order dated 4 April 2013 in Welspun Syntex Ltd. vs. The Commissioner of Central Excise and Customs (Central Excise Appeal No.33 of 2013) = (2013-TIOL-330-HC-MUM-ST) has granted the complete waiver of pre deposit. In the above case as in this case, the appellant therein commenced making payment of service tax in respect of its conducting agreement under the new entry viz. renting of immovable property with effect from 1 June 2007. This new entry was not carved out of any existing entry and has been made taxable for the first time. In view of the fact that the appellant also commenced making payment of service tax on renting of immovable property with effect from 2007 there was no question of providing a business support service prior to 1 June 2007. Besides, it was submitted that the contention of the appellant that the demand is entirely time barred on account of its bonafide belief was not even considered by the Tribunal.
 
Respondent’s contention:-The respondentsubmits that the order of the Tribunal is a well-reasoned order and calls for no interference. It was explained that this is only a order passed on an application for dispensing with pre-deposit of service tax and penalty and at the final hearing all contentions  would be considered. In the circumstances, this Court should not interfere in the present facts particularly, when no financial hardship has been pleaded. In the circumstances, there is no warrant to vary the impugned order passed by the Tribunal.
 
Reasoning of Judgment:- Having considered the rival submissions, they found that the appellant has commenced paying service tax on the service rendered by it to its concessionaire under the category of renting of immovable property immediately on its introduction in 2007. The respondent revenue is collecting revenue under the head renting of immovable property. At no point of time did the revenue dispute the said classification of services rendered by the appellant under the category of renting of immovable property. The decision of this Court in Welspun (supra) relied upon by the appellant appears distinguishable as in that case what was given on hire was complete factory along with plant and machinery and equipments and no separate service in support of business was being provided as in the present case. On merits, at this stage we find no reason to interfere with the prima facie view of the Tribunal that services provided by the appellant would be classifiable under the head business support service.
 
However, they found that the appellant of its own commenced paying service tax with effect from 1 June 2007 on the introduction of renting of immovable property. This itself would show that there was a bonafide belief on the part of the appellant that services being rendered by them was not taxable prior to 1 June 2007. The respondent revenue has accepted the service tax under the head “renting of immovable property” till date without any objection. It was only after two years after the appellant had commenced paying service tax under the category of renting immovable property that a show cause notice demanding service tax from 1 June 2006 to 31 May 2007 has been issued on 22 October 2009. This non-payment of service tax by the appellant for the period 1 May 2006 to 31 May 2007 in the present facts could prima facie be considered to be on a bonafide understanding that it is not liable to service tax. In the circumstances, the invocation of extended period of limitation is very debatable. However, this submission of the appellant was not even considered by the Tribunal in its impugned order.
 
In the circumstances, the impugned order dated 21 March 2013 is modified and the appellant is directed to make the pre deposit of 25% of the service tax demand within 6 (six) weeks from today. On the appellant satisfying the Tribunal that it has made the requisite deposit as directed by them, the appellant's appeal for final hearing will in its turn be taken up by the Tribunal. Accordingly, the appeal is disposed of in the above terms.
 
Decision:- Appeal  disposed of.

Comment:- It is often contended that service tax cannot be levied under different category for the prior period if a new levy is introduced from a particular date unless and until the new levy is carved from a particular service. However, the above contention was not accepted in the present case and the activity of letting out portion of retail stores to different brands was held to be primarily covered by BSS before introduction of the service of renting of immovable property. However, on limitation aspect, the High Court reduced the pre-deposit from 50% to 25%.  

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