One-Time Contribution paid to Members by SPV to Its Members not subject to Service Tax as “Immovable Property Services”: CESTAT
The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Ahmedabad Bench ruled that One-Time Contribution paid to Members by Special Purpose Vehicle (SPV) to its members is not subjected to Service Tax as “Immovable Property Services”.
The appellant M/s Gujarat Eco Textile Park Limited floated integrated textile parks under the scheme of integrated textile parks (SITP) formed by the Government of India (Ministry of Textiles). The appellant is SPV a public private partnership.
The appellant SPV was formed for acquiring land and setting up infrastructure for establishing textile parks wherein different member textile units could operate. The Ministry of Textiles had engaged IL & FS as Project Management Consultant (PMC) for implementation of the scheme. The said PMC reports to the Ministry of Textiles. The Ministry of Textiles supervises the operation of the parks through said PMC. The SPV also consists of representatives of Local Industries, Financial Institutions, state and Central Government representatives.
On account of purchase of equity shares the unit becomes a member of the SPV. The non-refundable contribution given by the members is invested and used for construction/ development of infrastructure and common facilities in the industrial park as the scheme. The amount collected as rent and user charges/ variable expenses from the members are treated as consideration for rendering service in the nature of renting immovable property and other miscellaneous services and appropriate service tax has been paid by the appellant. Now the Revenue sought to demand service tax on the non-refundable contribution made by the member units towards the expenditure of the park for developing and constructing the infrastructure under the category of “renting of immovable property service”. The case of the department is that rental amount is collected in guise of non-refundable contribution which is nothing but service charge against renting of immovable property service hence, liable to service tax.
Paritosh Gupta, Counsel appearing on behalf of the appellant, at the outset, submited that the issue in the present case is absolutely identical to the case of the appellant which was decided by the tribunal.
He submits that in the present case there is no change of circumstances and the fact the only difference is the present demand is periodical for the subsequent period, therefore, the issue remains the same. He submits that in view of the said judgment of the Tribunal demand in the present case is not sustainable.
The coram of Ramesh Nair and Raju observed that though the entire case of the department is that one-time refundable amount collected by the appellant from its member units is the service charge against the provision of ‘Renting of Immovable Property Service’ but the department has not adduced single evidence in support of its allegation. Hence, the contribution of the department in this regard has no legs to stand.
The Tribunal while setting aside the demand held that the service provided by the company incorporated under the Companies Act to its members is not under tax net.
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