2014 (9) TMI 306 - AT - Service Tax

Tribunal clarifies service tax on leasing vacant land for business vs. residential use

M/s. Greater Noida Industrial Development Authority Versus CCE & ST, Noida

M/s. Greater Noida Industrial Development Authority Versus CCE & ST, Noida - 2015 (38) S.T.R. 1062 (Tri. - Del.) , [2016] 87 VST 461 (CESTAT) Issues Involved:1. Taxability of leasing vacant land for construction of buildings or temporary structures for business or commerce.2. Inclusion of one-time premium in the taxable amount.3. Taxability of leasing vacant land for residential complexes.4. Taxability of processing and building plan fees, transfer charges, and miscellaneous income.5. Taxability of rent received from staff for residential units.6. Overlapping of service tax demands in two show cause notices.7. Applicability of the extended period for service tax recovery.8. Imposition of penalties under Sections 76, 77, and 78.Detailed Analysis:1. Taxability of Leasing Vacant Land for Construction of Buildings or Temporary Structures for Business or Commerce:The Tribunal held that giving vacant land on lease for construction of buildings or temporary structures to be used for furtherance of business or commerce became taxable only from 1.7.2010, when clause (v) was added to Explanation-I to Section 65(105)(zzzz). This activity was not taxable during the period prior to 1.7.2010. The Tribunal referenced its previous decision in the New Okhla Industrial Development Authority case, where it was concluded that leasing vacant land for business or commerce purposes was outside the purview of service tax before 1.7.2010.2. Inclusion of One-Time Premium in the Taxable Amount:The Tribunal clarified that service tax under Section 65(105)(zzzz) read with Section 65(90a) is chargeable only on the rent, not on the one-time premium or salami. The premium is considered a capital income for transferring interest in the property, whereas rent is a revenue receipt for the continuous enjoyment of the property. Therefore, the demand for service tax on the premium amount was not sustainable.3. Taxability of Leasing Vacant Land for Residential Complexes:The Tribunal held that leasing vacant land to builders or group housing societies for constructing residential complexes does not attract service tax under Section 65(105)(zzzz) read with Section 65(90a). Such leases are not for furtherance of business or commerce as defined in the Act.4. Taxability of Processing and Building Plan Fees, Transfer Charges, and Miscellaneous Income:The Tribunal stated that processing charges for land allotment on lease basis are taxable as they are in relation to renting of immovable property for business or commerce. However, charges related to building plan approval, map revision, and other construction-related activities are not taxable as they do not relate to the renting of immovable property for business or commerce. Penalties and restoration charges also do not attract service tax as they are not considered consideration for lease.5. Taxability of Rent Received from Staff for Residential Units:The Tribunal ruled that rent received from staff for residential units does not attract service tax under Section 65(105)(zzzz) as it is not for furtherance of business or commerce.6. Overlapping of Service Tax Demands in Two Show Cause Notices:The Tribunal directed the Commissioner to examine and provide a specific finding on whether the service tax demand of Rs. 4,13,45,830/- confirmed in the order dated 19.07.2012 is included in the service tax demand of Rs. 140,74,64,342/- confirmed in the order dated 30.04.2013.7. Applicability of the Extended Period for Service Tax Recovery:The Tribunal held that the extended period of five years under proviso to Section 73(1) of the Finance Act, 1994, is not applicable in this case. The appellant, being a statutory body, had a bona fide belief that leasing vacant land for construction purposes would not attract service tax. Therefore, the service tax demand is confined to the normal limitation period of one year from the relevant date.8. Imposition of Penalties Under Sections 76, 77, and 78:The Tribunal waived the penalties under Sections 76, 77, and 78 by invoking Section 80 of the Finance Act, 1994, due to the appellant's bona fide belief and the nature of their statutory functions.Conclusion:The Tribunal upheld the service tax demand for the normal limitation period and remanded the matter for de novo adjudication to the Commissioner, directing specific findings on overlapping demands and proper quantification of the service tax amount. Penalties imposed on the appellant were set aside.