MARGADARSI FINANCIERS Vs. COMMISSIONER OF C. EX., HYDERABAD

JUDGEMENT

(1.) THIS application filed by the appellant seeks waiver of pre -deposit and stay of recovery in respect of the amounts of service tax and penalties determined by the Commissioner for the period, June 2007 to March 2009, in adjudication of show -cause notice dated 18 -6 -2009. The impugned demand of service tax is under the head renting of immovable property and the same is on royalty (in the appellants parlance) or rent (in the departments parlance) collected by the appellant from M/s. Margadarshi Marketing Pvt. Ltd., to whom certain building/show -room (immovable property) was given by the appellant for commercial activity under a Memorandum of Understanding (MoU) dated 29 -12 -2001. Under the said MoU, M/s. Margadarshi Marketing Pvt. Ltd. (second party) was liable to pay to the appellant (first party) a royalty of 6% of gross sales in the show -room for a period of 10 years from 1 -2 -2002. This MoU also contained a provision for renewal for further period. The MoU stated that the building was being given on leave and licence basis. In adjudication of the show -cause notice, the learned Commissioner confirmed the demand of service tax on the so - called royalty collected by the appellant from the second party during June 2007 to Inarch 2009. He also imposed penalties on the assessee.

(2.) LEARNED counsel for the appellant submits that renting of immovable property was not a taxable service under Section 65 of the Finance Act, 1994 when the MoU was signed by the appellant and the other party. It is submitted that the taxable event occurred in February 2002. It is submitted that renting of immovable property was introduced as a new levy with effect from 1 -6 -2007 only. According to the learned counsel, what matters is the time at which the service was rendered or the taxable event took place and not the time at which the consideration for it was collected. On this basis, the learned counsel has also claimed support from two decisions of this Bench viz Art Leasing Ltd. v. C.C.E., Cochin [2007 (8) S.T.R. 162 (Tri. -Bang.) and L.F.C. Hire Purchase Company Ltd., v. C.C. and C. Ex. (Appeals) Cochin [2008 (12) S.T.R. 320 (Tri. -Bang.)]. In both the cited cases, demands of service tax under the head Banking and Other Financial Services were set aside by the Tribunal. The learned counsel has made an endeavour to draw a parallel between hire purchase contracts involved in the cited cases, and the MoU referred to in the instant case. Learned counsel has also pleaded time -bar against the impugned demand.

(3.) WE have heard the learned SDR also, who has opposed the plea for waiver and stay on the strength of the findings contained in the Commissioners order. He has particularly referred to sub -section 3 of Section 67 of the Finance Act, 1994 in his endeavour to make out a case for the Revenue.