The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax cannot be levied on the notional interest calculated by the department on the interest free security deposit.

The bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that since the consideration for leasing of the property is rent, so what can be levied to service tax is only rent and notional interest on the security deposit cannot be subjected to levy of service tax.

The appellant/assessee is engaged in providing services of renting of private lockers covered under Banking and other financial services and are registered with the department. 

It was alleged that during the period from April 2012 to March 2015, the appellant demanded in the table above has charged locker ret as well as refundable interest free security deposits from their clients to whom the said lockers were rented out but has not paid due amount of service tax leviable on the value of taxable service which includes the notional interest on interest free deposits also.

The show cause notices were issued to the appellants proposing amount. The proposals were confirmed.

The tribunal while allowing the appeal quashed the order passed by the Commissioner (Appeals).

Case Details 

Case Title: M/s Jyotsna Vaults v/s Commissioner (Appeals), Central Excise And Central Goods And Service Tax, Jaipur

Citation: Service Tax Appeal No. 52501 of 2018

Counsel for the Appellant: Sanjiv Agarwal, Chartered Accountant 

Counsel for the Respondent:  Shashank Yadav, Authorized Representative 

Read More: 100% Cenvat Credit on Management Consultancy Services in Rambagh Palace Hotel Case Allowed: CESTAT