Ashok K. Arya ORDER
Ashok K. Arya, Member (T)
1. M/s. Indo Hong Kong Industries (P) Ltd. is in appeal against Order-in-Original number 4/2013-14 dated 29.11.2013 wherein inter alia demand of service tax of Rs. 1,02,21,578.00 along with interest and imposition of equivalent penalty has been confirmed against the appellant.
2. The brief facts are that the appellant provided its premises along with equipment on rent to M/s. Alcatel Development India Private Ltd. under separate agreements. The appellant is registered with service tax department under the category of "Renting of Immovable Property Services". The appellant had given two premises known as "Fortune Tower-I" and "Fortune Tower-II" owned by them to M/s. Alcatel Development India Private Limited for use as office, with two separate lease deeds. The appellant assessee leased the said premises along with high quality fire equipments, electrical systems, Air Conditioning plants, DG sets, elevators, fixtures and fittings, chairs, carpeting, pantry and kitchen equipments, music and PA system, access control and security system, etc.
2.1 The appellant has two separate agreements, one for renting of immovable property another for hiring of equipment and facilities. The appellant makes a mention that they did not provide any service/facility like engineering and maintenance service to run and maintain DG sets, AC plants, etc., it was only the service recipient i.e. M/s. Alcatel who is doing the same.
2.2 The Revenue's stand is that providing of office utilities, equipment and facilities by the appellant to the recipient is covered under Business Support Services(BSS), which has been defined under section 65(104c) of the Finance Act 1994. Therefore, the department has confirmed the liability of service tax in case of the amount collected under agreement-2 or 'hiring agreement' by the appellant assessee.
3. With the above background, we have heard learned CA Sh AK Batra on behalf of appellant and learned DR, Dr Neha Garg on behalf of Revenue. After having gone through the case records and submissions of both the sides, it appears that the appellant assessee provided certain equipments and facilities through a separate hiring agreement to M/s. Alcatel. The Revenue is claiming that providing said equipment/facilities are covered under the expression 'infrastructural support services' and would become part of the definition of 'support services of business or commerce' or Business Support service (BSS), as defined under section 65(104c) of the Finance Act, 1994.
3.1 The learned CA for the appellant during the hearing mentions that the assessee has been paying service tax for the amount collected under agreement 2 which is for hiring out equipment and facilities w.e.f. 01.06.2007 till 31.03.2010 under the category of "Renting of Immovable Property Services".
4. The total period involved in the appeal is from 01.05.2006 to 31.03.2010. If the claim of payment of service tax of the appellant for the period from 01.06.2007 to 31.03.2010 (though under the category of "Renting of Immoveable Property Services", not under "Business Support Services"), is taken into consideration then the demand is due only for the balance period i.e. from 01.05.2006 to 31.05.2007. In other words, the effective demand of service tax against the appellant is for the period of 01.05.2006 to 31.05.2007 in case of collections made under Agreement-2 for hiring out equipment and utilities, which are termed as 'Infrastructural Support Service' and is said to be covered by the Revenue under Business Support Services provided by the appellant assessee to M/s. Alcatel.
4.1 The learned CA Sh AK Batra for the appellant is arguing that they have not provided service/facilities like engineering and maintenance service to run said office equipment, therefore, they cannot be called 'Infrastructural Support Services' and cannot be covered under 'Business Support Services' as defined by under section 65(104c) of Finance Act 1994.
4.2 The dictionary meaning of infrastructure is - the basic systems and services that are necessary for an organization to run smoothly. The appellant has provided air-conditioning plants, DG sets, chairs, work station, pantry and kitchen equipment, access control and security system and so on. From the prudent persons' point of view, the said equipment and facilities are certainly in the nature of infrastructure. The appellant has provided them not on sale basis but on hiring basis. It means that there is continuous link of the appellant with these equipment and if during the hiring period there is any break-down in those systems, it would be the responsibility of the appellant to get those fixed as per the recipient's wish and requirement. In other words, when there is a continuing link and nexus of the appellant with the said equipment and facilities it cannot be called that this is not an 'infrastructural support'. And once it is an infrastructural support, the fact of providing the said equipment and facilities would be covered by the definition of 'Support Services of Business or Commerce' as defined in section 65(104c) of Finance Act, 1994 and, therefore, the collections made on account of providing these equipment and facilities to M/s. Alcatel would be chargeable to service tax under section 65(105zzzq) as the 'Business Support Service' provided by the appellant to M/s. Alcatel.
4.3 Learned CA for the appellant has cited the CESTAT Bombay decision in case CCE-Aurangabad Vs. Narsinha SSK Ltd., 2015 (38) S.T.R. 165 (Tri.-Mumbai). However, in that case, factory was leased-out along with machine and machinery and this will not be applicable for present case, where by separate agreement the appellant is providing equipment and facilities on hire basis. Therefore, in the present case as held above, it is a 'business support service' provided by the appellant to M/s. Alcatel.
4.4 As the appellant clams that they have discharged their service tax liability on hiring charges also for the period of 01.06.2007 to 31.03.2010, the tax paid by the appellant can be appropriated by the department under the service head of 'Business Support Services'. However, as the service tax in case of Business Support Service came into effect from 1.3.2006 though the period involved here as w.e.f. 1.05.2006, the appellant is liable for payment of service tax for the services of 'business support service' on hiring charges received from M/s. Alcatel for the said period of 1.5.2006 to 31.5.2007 along with interest.
5. Regarding the penalty, the appellants state that they voluntarily made payment of service tax along with interest prior to issue of show cause notice. The appellant, therefore, argues that imposition of penalties against them is not warranted and should be dropped as they bona fidely believe that their services were not taxable. In support, the appellant has cited following case laws:
i. Nair Coal Services Ltd. Vs. CCE Nagpur dated 27.7.2016 cited as MANU/CM/0722/2016 : 2016 (45) STR 529 (Tri. Mumbai)
ii. Veritn Software Solutions Pvt. Ltd. Cs CCe, Mysore dated 20.6.2014 cited as MANU/CB/0256/2014 : 2015 (39) STR 845 (Tri.-Bang.)
iii. CCE. Cochin Vs. Saju Engineering Company dated 25.1.2016 cited as MANU/CB/0013/2016 : 2016 (43) STR 394 (Tri.-Bang.)
Considering the CESTAT decision in case of Nair Coal Services Ltd. (supra) and Vertin Software Solutions Pvt. Ltd., it appears that provisions of section 80 of the Finance Act, 1994 would be applicable in case of appellant assessee. Therefore, the penalties imposed on the appellant assessee under sections 77 and 78 are hereby dropped.
6. In the light of above observations, the impugned order is modified to above effect and the matter is remanded to original adjudicating authority to quantify the payment of service tax for the period of 1.5.2006 to 31.5.2007 along with interest against the appellant within four months of receipt of this Order after giving necessary opportunity of personal hearing to the appellant.
7. In the result, the appeal is partly allowed in above terms.
[Pronounced in court on 15.03.2017.]
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