The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the payment of a one-time premium or salami cannot be charged to service tax under the heading "renting of immovable property service."
The two-member bench of Ramesh Nair (judicial member) and Raju (technical member) has observed that 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 an interest in the property from the lessor to the lessee as the amount is not for the continued enjoyment of the property leased.
The issue raised was whether service tax is leviable on one-time premiums or salami under the category of renting immovable property.
The demand has been confirmed, considering the one-time premium charged by the appellant as rent in addition to the annual lease rent that is being charged separately. The demand has been confirmed considering the one-time premium as a consideration towards rent, and a perusal of the contract shows that rent was being charged over and above the one-time premium.
The appellant contended that it is a settled legal position that a one-time premium or salami cannot be considered as consideration for rent and hence cannot be levied to service tax under the category of renting immovable property.
The department argued that because the appellant had leased the land for 30 years and had not sold it, the premium amount collected as a cost of land was insufficient. The amount is simply a portion of the rent, and according to Section 67(1) of the Finance Act of 1994, service tax is levied on any taxable service based on its value. The amount, whether it is a premium, deposit, or whatever accounting name is assigned, is part and parcel of the gross value of taxable service. However, by not paying the appropriate service tax on said premium amount, they clearly show their intention to evade the service tax. The appellant is required to pay the service tax from the date of the invoice and not from the date of payment, and accordingly, demand is rightly invoked.
The tribunal has allowed the appeal and set aside the service tax demand on the one-time premium.
Case Title: Gujarat Power Corporation Ltd. Versus C.C.E. & ST
Citation: Service Tax Appeal No. 10193 of 2017
Counsel For Appellant: Advocate Amal Dave
Counsel For Respondent: Assistant Comm. (Authorized Representative) Dinesh Prithiani