Ratna Sagar Safe Deposit Vaults Pvt. Ltd Vs Commissioner of CGST & Central Excise (CESTAT Delhi)
Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Delhi has delivered a significant ruling, asserting that notional interest calculated on interest-free security deposits collected for safe deposit locker rentals cannot be subjected to service tax. This decision, in the case of Ratna Sagar Safe Deposit Vaults Pvt. Ltd Vs Commissioner of CGST & Central Excise, quashes a demand for service tax amounting to Rs. 23,45,350/- for the period April 2012 to March 2016. The Tribunal’s order reinforces earlier pronouncements on the distinction between actual consideration for service and security deposits.
Background of the Demand
Ratna Sagar Safe Deposit Vaults Pvt. Ltd., the appellant, is a company engaged in providing safe deposit services, including the renting of private lockers. These services fall under the purview of “banking and financial services” for tax purposes. In addition to the agreed-upon rent for the lockers, the company collected interest-free security deposits from its customers. These deposits were refundable upon the surrender of the lockers.
A show cause notice dated November 3, 2017, was issued to Ratna Sagar, proposing a demand for service tax by including the “notional interest” on these security deposits in the value of taxable services. The Adjudicating Authority subsequently confirmed this demand, along with interest and penalties, in an order dated July 19, 2018. The appellant’s appeal against this confirmation was rejected by the Commissioner (Appeals), leading to the current appeal before CESTAT Delhi.
