Kagal Nagar Parishad Vs Commissioner of Central Excise (CESTAT Mumbai)
Revenue sought to tax the one time premium deposit, which is not refundable under the head of renting of immovable property service considering the same as rent. We find that there is a separate charge for the rent, which alone is taxable, the onetime premium charges is non-refundable deposit, it is called as one time premium and not part of rent. Therefore, the same is not taxable.
FULL TEXT OF THE CESTAT ORDER IS AS FOLLOWS:-
The issue involved in the present case is that in the course of leasing of the premises of Government local authority, they keep a non-refundable deposit, which is called as one time premium of Salami, which is not refundable, whether the said deposit is liable for Service Tax under the head of renting of immovable property.
2. Shri V.B. Gaikwad, learned Counsel appearing on behalf of the appellant submits that this issue is no longer res integra as the same has been decided for such non-refundable deposit cannot be taxed towards the service of renting of immovable property. He placed reliance on the following judgments: –
(i) Greater Noida Indl. Devp. Authority – 2015 (38) STR 1062 (Tri-Del)
(ii) Mormugao Municipal Council – 2017 (7) GSTL 228
(iii) Municipal Corpn. Rjahmundry – 2017 (5) GSTL 78
(iv) Municipal Corpn. Aurangabad – 2017 (5) TMI 950
3. Shri Atul Sharma, learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both sides and perused the records. We find that the Revenue sought to tax the one time premium deposit, which is not refundable under the head of renting of immovable property service considering the same as rent. We find that there is a separate charge for the rent, which alone is taxable, the onetime premium charges is non-refundable deposit, it is called as one time premium and not part of rent. Therefore, the same is not taxable. This issue has been considered by this Tribunal in the various judgments cited by the learned Counsel. In the case of Greater Noida Indl. Development Authority (supra), coordinate Bench of this Tribunal, wherein the following order was passed: –
10. Whether the Service Tax is chargeable only on the lease rent or also on one time premium amount charged in respect of long term leases?
10.1 A lease is a transaction, which has to be supported by consideration. The consideration may be either premium or rent or both. The consideration which is paid periodically is called rent. As regards premium, the Apex Court in the case of Commissioner of Income Tax, Assam and Manipur v. Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811 has made a distinction between premium and rent observing that when the interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments for continuous enjoyment are in the nature of rent, the former is a Capital Income and the latter is the revenue receipt. Thus, the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the “premium” or ‘salami’ paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance. In these appeals, in the show cause notice dated 19-3-2012 issued by the Addl. Director, DGCEI, New Delhi, Service Tax has been demanded only on the lease rent and not on the premium amount while in the subsequent show cause notice dated 17-10-2012 issued by the Commissioner of Central Excise and Service Tax, Noida, the amount of premium has also been included in the lease rent for the purpose of charging of Service Tax for which no valid reasons have been given. Therefore, the Order-in-Original dated 30-4-2013 confirming the Service Tax demand on the premium amount is not correct and to this extent, the Service Tax demand would not be sustainable.
5. In view of the above judgment, the issue is no longer resintegra. Accordingly, onetime non-refundable deposit is not liable for tax under the head of renting of immovable property. Therefore, the impugned order is set aside and the appeal is allowed.
(Pronounced in Court on 16.05.2018)