Renting of Immovable Property including Vacant Land owned by Corporation would Fall within Scope of Taxable Service: CESTAT [Read Order]

The Bangalore bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has ruled that the renting of immovable property, including vacant land owned by a corporation, falls within the scope of taxable service.

M/s. Thrissur Municipal Corporation had filed this appeal to assail the order dated 3.7.2018 passed by the Commissioner Central GST and Central Excise, Kozhikode Commissionerate by which the Service Tax demand has been confirmed under Section 73 (2) of GST Act , 2017, along with interest and penalty

Mr. P. Saravana Perumal representing the respondent reiterating the detailed findings of the Commissioner submitted that the Commissioner has taken into consideration the errors of calculation and devised the correct method of calculation of service tax based on the value reflected in the “income and expenditure statement and the Advanced Accounts”, hence there is no dispute as far as the valuation is concerned. He also relied on the decision of the Principal Bench New Delhi in the case of Municipal Corporation versus CG Raipur vide Final Order No.58617/2017 where it was observed that “the appellant is a local authority functioning under Chhattisgarh Municipal Corporation Act, 1956 and the present appeal relates to tax liability of the appellant under the category of “Renting of immovable property” in terms of section 65(90a) of the Finance Act 1994.

Mr. P. Raghunathan, representing the appellant submitted that they are liable to pay tax on “renting of immovable property” and “vacant land” which is meant for commercial purposes. Hence, requested to uphold the decision of the Commissioner.

The bench found that there was no dispute that whenever the appellant rendered services in furtherance of business or commerce, necessary Service Tax is being paid even though there are disputes regarding the taxable value. The alleged short-payments are not with any intent to evade payment of duty but on assessing the incorrect taxable value. Having already held in the previous paragraphs that the appellant is not liable to pay Service Tax for some of the services, as rightly pointed out by the appellant there is nothing on record to establish the intent to evade payment of duty.

Further, the commissioner has only alleged that the appellant should have assessed correctly and there are no material facts on record to establish that the appellant had suppressed any facts with intent to evade payment of duty. It is also on record that the audit had taken the Trial Balance value details for the purpose of taxable value which has been rightly rejected by the Commissioner observing that the demand has been inflated by taking incorrect taxable value.

In view of the above facts and based on the observations of the Supreme Court that suppression involves misdeclaration with the intent to evade payment of duty and there is nothing on record in the impugned order to establish that the appellant’s intention to evade.

Therefore, the two member bench of the tribunal comprising D.M Mishra (Judicial member) and R. Bhagya Devi (Technical member) set aside the demand for the extended period and restricted it to the normal period of limitation.

Therefore, since the demand except for telecom services are barred by limitation, the matter was being remanded for redetermination of the taxes based on tribunal observations under each category. While redetermining the same, the written submissions dated 19.10.2023 filed by the appellant with regard to the factual errors and duplication of taxes need to be considered.

An opportunity of being heard was to be provided before redetermination of the demands to the appellants. All penalties are set aside, accordingly, appeal was allowed by way of remand.

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