Rental of immovable property and provision of tangible property cannot be classified under infrastructure support service, the Ahmedabad Bench of the Customs, Excise and Service Tax Appeals Tribunal (CESTAT) has rescinded the duty order.
Welspun Syntex Ltd, the appellant, manufactured yarn falling under heading 54 of the Central Excise Tariff Act 1985, Chapter 54 and had its head office and factory in Gujarat. The appellant has another factory in Palghar, Maharashtra. During the Disputed Period, the Appellant entered into an Enforcement Agreement dated 08.25.2004 read with additional agreements dated 10.25.2004, 08.05.2005 and 08.25.2007 (“Enforcement Agreement”) with International Syntha Fabs Pvt Ltd (“ISFPL”) notably allowing ISFPL to use the land and plant, machinery and equipment (“SME”) of the Palghar factory on a lease basis.
The consideration received for the lease of land and an SME by the appellant from the ISFPL, during the period in dispute and the department considered it liable to the service tax for the service business support provided by the caller to the ISFPL.
The commissioner in original order found that the SME leasing activity is classifiable as taxable business support service and upheld the service tax claim with effect and imposed an equal penalty under section 76 and a penalty under sections 77 and 78 was also imposed.
It was a constant position in law that when a new category of service was inserted to tax an activity, said activity cannot be considered taxable before said insertion in another category of services. The plant rental activity was taxable as the taxable service ‘rental of real estate’ from 01.06.2007 and the rental/rental of machinery and equipment was taxable as the taxable service ‘delivery of tangible goods ‟ from 16.05.2008.
The CESTAT bench observed that the Appellant supplied all plant machinery and equipment to ISFPL and that the Appellant was not involved in day-to-day infrastructural support to M/s International Syntha Fabs Pvt Ltd (“ ISFPL”), therefore, the appellant’s activity cannot be classified as infrastructure support service.
CESTAT Headquarters composed of Mr. Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical) considered that rental of real estate and supply of tangible goods cannot be classified as infrastructure support services . While allowing the appeal, the CESTAT annuls the contested order.
Sri. Mihir Mehta & Shri. Suyog Bhave, Solicitors, appeared for the Appellant and Shri Rajesh K Agarwal, Authorized Representative, appeared for the Respondent.
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