2019 (2) TMI 1246 – CESTAT CHENNAI – TMI – Levy of service tax – immovable property given in settlement of agreement – operation and licence agreement – termination of the agreement – demand of service tax raised on the value of immovable property which was given to them as part of settlement deed – Held that:- After 18.4.2006, it can be seen that even if consideration is received as kind or other than money, the value of such kind other than money is also subject to levy of service tax. The value of any immovable property received as consideration would be subject to levy of service tax after 18.4.2006. In the present case, the appellants have received consideration in the nature of money as well as in the nature of immovable property. They paid up the service tax on the consideration received in the form of money. Even if the value of the immovable property is shown in the books of accounts in terms of money, it will not change the nature of the consideration received. The amendment
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arified that the amendment to Section 67 proposes to include consideration received not wholly in terms of money.
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The demand of service tax on the value of immovable property to the tune of ₹ 30,60,000/- with the penalties thereon cannot sustain and requires to be set aside – As the assessee is not contesting the demand of service tax of ₹ 33,53,890/- with interest thereon, no interference is made in respect of this demand, however, penalty set aside.
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Appeal allowed in part. – ST/120/2010 – Final Order No. 40308 / 2019 – Dated:- 18-2-2019 – Hon ble Ms. Sulekha Beevi C.S., Member (Judicial) And Hon ble Shri Madhu Mohan Damodhar, Member (Technical) Ms. Radhka Chandrasekar, Advocate for the Appellant Shri K. Veerabhadra Reddy, ADC (AR) for Respondent ORDER Per Bench The appellants are providing consultancy and management services to hotels and resorts. They are registered under the category of Management Consultancy Services and Intellectual Property Service. Durin
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proposing to demand service tax to the tune of ₹ 64,13,890/- along with interest and also proposing to appropriate an amount of ₹ 33,53,890/- as well as interest of ₹ 2,37,093/- which was already paid by them. The show cause notice also proposed to impose penalties. After due process of law, the original authority confirmed the demand of ₹ 64,13,890/- for the period April 2006 to December 2006 along with interest and also imposed penalty of ₹ 75 lakhs under section 78 of the Finance Act, 1994 with option to pay reduced penalty of 25%. Aggrieved, the appellants are now before the Tribunal. 2.1 On behalf of the appellant, ld. counsel Ms. Radhika Chandrasekar explained that the appellants entered into a resort operation and licence agreement dated 14.4.2005 with M/s. Sterling Holiday Resorts India Ltd. (SHRIL for short). As per the agreement, the appellant was entrusted with the responsibility of operating 11 resorts owned by SHRIL. For rendering such servic
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lved handing over of the property as part of the settlement. The transaction of transferring of the property was consummated on the date of execution of settlement agreement which is 1.3.2006. 2.3 Section 67 of Finance Act, 1994 as it stood during the relevant period, prior to 18.4.2006, contemplates levy of service tax on gross amount charged in nature of money only. Thus any consideration received other than money was not subject to levy of service tax prior to 18.4.2006. The department has referred in the show cause notice the said section as it stands after the amendment with effect from 18.4.2006. Therefore, the demand of service tax on the value of immovable property is incorrect. Section 67(1)(ii) prior to 18.4.2006 contemplates amount in money, which is equivalent to the consideration. Consideration also includes amount that is payable. Therefore levy can be made only when consideration is passed on in the nature of money. Further as per Rule 6(1) of Service Tax Rules, service
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ration received in the form of money was subject to levy of service tax and service tax is leviable on the consideration payable on the services already provided. Further service tax was payable during the disputed period on receipt basis. The appellant is therefore not contesting the service tax relating to consideration in money and is contesting the demand of service tax only on the amount relating to the value of the property acquired by them towards the final settlement. She also submitted that the point of taxation rules have come into effect only in 2011 wherein the service tax is thereupon liable to be discharged on accrual basis instead of receipt basis. 3. In grounds para 33, 34 and 35, the appellants have contested the penalties imposed. It is submitted that the service tax of ₹ 33,53,890/- and interest of ₹ 2,93,093/- was paid on 27.3.2008 which is much before issuance of show cause notice which is dated 15.5.2008. She prayed to set aside the penalties. 4. The l
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IL. It is also submitted by him that the sale deed for transfer of the property was executed much later and therefore the value of the property would any how be subject to levy of service tax as per the amended provisions of Section 67. Further from the agreement, it is clear that the services were provided for monetary consideration and entered in the books of accounts in terms of money only. Merely because a portion of the service charges was paid by the service provider by way of immovable property, does not take away the liability to pay service tax. 5. Heard both sides. 6.1 The assessee is contesting only the demand of service tax raised on the value of immovable property which was given to them as part of settlement deed. 6.2 M/s. SHRIL had entered into an agreement with the appellant for operating the various resorts owned by SHRIL. However, both the parties later agreed mutually to terminate the above agreement by a final settlement agreement dated 1.3.2006. The relevant portio
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ng 31.3.2006. This amount of ₹ 3,34,81,431/- (Rupees three crores thirty four lakhs eighty one thousand and four hundred and thirty one only) is mutually agreed upon and this will not be questioned by either parties of this agreement. 2. AUROMATRIX confirms and acknowledges that they have so far received a sum of ₹ 1,25,00,000/- (Rupees one crore twenty five lakhs only) against the amount payable as stated in clause 1 herein above leaving a balance of ₹ 2,09,81,431/- (Rupees two crores nine lakhs eighty one thousand four hundred and thirty one only). 3. Sterling agree to pay another sum of ₹ 1,20,00,000/- (Rupees one crore twenty lakhs only) towards royalty and management fee for the period 1.4.2006 to 31.3.2007. 4. Sterling have agreed to pay the balance of ₹ 3,29,81,431/- (Rupees three crores twenty nine lakhs eighty one thousand and four hundred and thirty one only) as per Annexure A in the following manner:- ANNEXURE A I Amount due as per agreement dat
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d by the appellant in this appeal. During the disputed period, Section 67 of Finance Act, 1994 read as under:- Valuation of taxable service for charging service tax – For the purpose of this chapter the value of any taxable service shall be the gross amount charged by the service provider of such service provided or to be provided. By him. xxxx xxxxx xxxxx xxxxx xxxxx Explanation. – For the purposes of this section, – (a) consideration includes any amount that is payable for the taxable services provided or to be provided; (b) money includes any currency, cheque, promissory note, letter of credit, draft pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value. (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be,
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which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. 6.5 Thus, after 18.4.2006, it can be seen that even if consideration is received as kind or other than money, the value of such kind other than money is also subject to levy of service tax. The value of any immovable property received as consideration would be subject to levy of service tax after 18.4.2006. In the present case, the appellants have received consideration in the nature of money as well as in the nature of immovable property. They paid up the service tax on the consideration received in the form of money. Even if the value of the immovable property is shown in the books of accounts in terms of money, it will not change t
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o be paid by arriving at the quantum for different periods. For example, royalty fee upto March 2006, royalty fee for the period from April 2006 to March 2007, management fee for the period April 2006 to March 2007 etc. These periods mentioned in Annexure A of the agreement does not indicate that the appellant has provided services from April 2006 to March 2007 or royalty fee was paid from April 2006 to March 2007. The periods mentioned in the said final settlement is only for the purpose quantification of the final settlement amount. The conclusion of the Commissioner that the amount settled by way of selling the immovable property is for the services provided for the period from 1.4.2006 to 31.3.2007 is incorrect. After the final settlement, undisputedly there has been no service provided by the appellant to SHRIL. Though part payments might have been received, such payments including the immovable property is for the services provided (or settled) upto 1.3.2006. It is also to be men
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ubstitute the existing section 67 with a new section67 to provide for determination of value of taxable service. At present, service tax is charged on the gross amount received. The proposed section provides determination of taxable value in cases where the consideration received for taxable services provided is not wholly in money terms and the consideration received is in money terms but not known explicitly. Separate valuation rules are proposed for this purpose . 6.8 In Vistar Construction (P) Ltd. Vs. Union of India reported in 2013 (31) STR 129(Del.), the Hon ble High Court of Delhi held that taxable event for service tax was rendition of service and that rate of tax applicable is the one on date on which services were rendered and not the rate on which payments were received. Since the amended Section 67 has come into effect only with effect from 18.4.2006, the immovable property which is part of consideration of Settlement Agreement dated 1.3.2006 would not be subject to levy o
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