By TIOL News Service

MUMBAI, JUNE 03, 2013: THE appellants manufacture Sugar and other excisable goods and are registered with Central Excise department as such. They rented out part of the premises to Bank, BSNL and Post Office.

The department took the view that the appellant has to discharge the Service Tax under the category “Renting of immovable property”. Accordingly, a notice was inter alia issued for the period 1.6.2007 to 31.3.2010 for recovery of Service Tax of Rs.53,867/-.

Before the Commissioner(A) against the confirmation of the demand and imposition of penalties and interest, the appellant submitted that -

+ since the sugar factory is located in backward area and the Bank, BSNL and Post Office are for welfare of their employees, therefore, Service Tax is not liable on the said services, inasmuch as the renting of immovable property is not for business and commercial purpose, but only as a welfare measure for their employees.

+ even if the activity is said to be under the category of ‘renting of immovable property', their turnover in respect of the services rendered did not exceed the threshold limit of Rs. 4-10 lakhs during the relevant period and, therefore they are eligible for benefit of SSI exemption Notification No. 8/2005-ST.

The lower appellate authority was not impressed. While rejecting the first contention outright, in the context of the claim for SSI exemption, it was observed that the appellant is a ‘large' sugar factory and they could have exceeded the threshold limits required for availing exemption as a small service provider.

Before the CESTAT the appellant makes similar submissions and the Revenue representative too did not add much into what was already held by the lower authorities.

The Bench observed -

“5.1 As regards the contention that renting out of premises to Bank, BSNL and Post Office does not amount to renting of property for use in course of furtherance of business or commerce, we do not agree with the contention. Bank and BSNL are commercial organizations and if the appellant has rented out their premises to them, it amounts to furtherance of business or commerce. As regards the Post Office, the appellant might have a case and the arguments will have to be considered after examining the provisions of the Indian Post Act. Therefore, the Service Tax demand on the rent collected from the Bank and BSNL, is legally sustainable.

5.2 As regards the second contention that whether the turnover of the appellant has exceeded the thresh hold limit of Rs. 4-10 lakhs under SSI Exemption Notification No. 8/2005 or not, it is a question of fact and has to be examined. For the purpose of examining the thresh hold limit, the gross amount received for renting of immovable property has to be taken into account. However, in addition to that, if the appellant has undertaken any other services, the turnover of those services will also be required to be taken into account. The appellant being a sugar factory, they must be discharging the Service Tax on GTA services availed by them, such services on which they are discharging the Service Tax might also be includable in thresh hold limit and this fact needs to be examined. Inasmuch as the lower appellate authority has not examined any of these facts, we are of the view that the matter should go back to the lower appellate authority. Therefore, we remand the matter back to the lower appellate authority who shall take into account the details of other services rendered by the appellant including GTA services and examine whether such services can be included while computing the thresh hold limit of small service provider's exemption or not. The appellant is also directed to provide all the relevant details in this regard.”

In fine, the appeal was allowed by way of remand.

(See 2013-TIOL-828-CESTAT-MUM)