Reinvestigate Service Tax Demand on Mall Operator Over ‘Renting of Property’ Dispute Pending Before Supreme Court: CESTAT
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has partly allowed the appeal of M/s Amrit Bottlers Pvt. Ltd., the operator of Riverside Mall, Lucknow, against a service tax demand exceeding ₹1.42 crore, remanding the main issue regarding renting of immovable property services back to the adjudicating authority for fresh consideration after the Supreme Court’s final decision in the Retailers Association of India v. Union of India case. The two-member bench comprising Angad Prasad (Judicial Member) and Sanjiv Srivastava (Technical Member) passed the order in Service Tax Appeal No. 51692 of 2015, partly allowing the appeal filed by the company and upholding certain portions of the original demand.
Background
The case originated from a service tax investigation against Amrit Bottlers Pvt. Ltd., the legal owner of Riverside Mall, located in Vipin Khand, Gomti Nagar, Lucknow. The company was engaged in providing taxable services, including management, maintenance or repair services, cleaning activity, and renting of immovable property services, as defined under Sections 65(64), 65(105)(zzg), 65(90a), and 65(105)(zzzz) of the Finance Act, 1994. The investigation was initiated after the department received information that the mall operator had not discharged full service tax liability on the rent collected from tenants, including Inox Leisure Ltd., Future Group (Big Bazaar), Barbeque Nation, Mainland China, Barista Coffee, and others.
Following visits by service tax officials and scrutiny of financial records, ST-3 returns, and balance sheets for FY 2007–08 to 2011–12, a show cause notice dated 23 October 2013 was issued demanding ₹1.84 crore in service tax, interest, and penalties for alleged short payment and irregular utilisation of CENVAT credit. The Commissioner of Central Excise & Service Tax, Lucknow, by order dated 24 December 2014, confirmed a demand of ₹1,42,43,376 along with interest under Section 75 and an equal penalty under Section 78 for suppression of facts, besides minor penalties under Sections 77(1)(b) and 70(1) of the Finance Act, 1994. The Commissioner also appropriated ₹35.44 lakh deposited by the appellant during the investigation. Aggrieved, the company approached the CESTAT in appeal.
Appellant’s Contentions
The appellant contended that the majority of the demand related to rent received from tenants who were members of the Retailers Association of India (RAI). The Supreme Court, in Retailers Association of India v. Union of India, had issued an interim order allowing RAI members to deposit 50% of arrears of service tax in three instalments and furnish solvent surety for the remaining 50%, pending the Court’s final ruling on the taxability of renting of immovable property services.
The appellant submitted that two of its major tenants — Inox Leisure Ltd. and Future Group — had already deposited 50% of the tax dues and submitted surety bonds for the balance with the jurisdictional excise authorities, in compliance with the Supreme Court’s directions. Accordingly, the company argued that the department’s demand for the same amount from the landlord constituted double recovery, which would be contrary to judicial discipline. The appellant, therefore, requested that the demand related to renting of immovable property be set aside or kept in abeyance until the Supreme Court delivers its final decision in the RAI matter.
Tribunal’s Findings
After examining the record, the Tribunal noted that the issue of taxability of renting of immovable property involving RAI members is pending before the Supreme Court, and interim protection continues to operate in favour of such members. It recorded that the appellant’s tenants — Inox Leisure Ltd. and Future Group — had complied with the Apex Court’s directions regarding payment and surety. The Bench observed: “As the issue regarding leviability of service tax on renting of immovable property is pending before the Hon’ble Supreme Court, the matter should be remanded to the original authority for fresh decision in light of the final verdict.” Accordingly, the Tribunal remanded the matter relating to renting of immovable property services to the adjudicating authority for reconsideration after the Supreme Court’s final judgment in the Retailers Association of India case.
Other Issues and Findings
On the issue of miscellaneous income, the appellant claimed that such receipts were derived from sale of scrap and interest, which are not taxable under the Finance Act, 1994. However, the Tribunal noted that no documentary evidence or supporting records were produced to substantiate this claim. Therefore, it upheld the demand of service tax, interest, and penalty under Section 78 on this account but directed the adjudicating authority to re-quantify the exact amount.
Regarding inadmissible CENVAT credit of ₹12.37 lakh, the Tribunal held that the appellant failed to produce invoices or supporting documents to justify the credit claimed in its ST-3 returns. It, therefore, upheld the recovery of ₹12.37 lakh, along with applicable interest and penalties under Section 78. Summarising its conclusions, the Bench stated:
The demand on renting of immovable property is remanded to the adjudicating authority for reconsideration after the Supreme Court’s final verdict.
The demand on miscellaneous income is upheld, subject to re-quantification.
The demand of ₹12.37 lakh in inadmissible CENVAT credit, along with interest and penalties, is confirmed in full.
Allowing the appeal partly, the CESTAT directed the adjudicating authority to re-examine the renting of immovable property issue in accordance with the forthcoming judgment of the Supreme Court. The Tribunal upheld the rest of the Commissioner’s order relating to miscellaneous income and irregular CENVAT credit, including penalties imposed. The appeal was accordingly partly allowed and partly remanded for limited re-adjudication.
Appearance
None, for the Appellant
Smt Chitra Srivastava, Authorised Representative for the Respondent
Cause Title: M/s Amrit Bottlers Pvt. Ltd. versus Commissioner of Central Excise & CGST, Lucknow
Case No: Service Tax Appeal No.51692 of 2015
Coram: Angad Prasad (Judicial Member), Sanjiv Srivastava (Technical Member)
