CESTAT Chennai: No Service Tax on Pre-2010 Land Leasing

The Appellate Tribunal CESTAT Chennai ruled in favor of the appellant, holding that the demand for service tax on amounts received before 1.7.2010 for leasing vacant land was unjustified. The Tribunal found the department's reliance on Notification No. 36/2010-ST to be erroneous and emphasized that the activity only became taxable from 1.7.2010. Citing relevant legal precedents, including decisions from the Hon'ble High Court of Allahabad, the Tribunal set aside the original order, allowing the appeal with consequential relief, if any.

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Issues:
1. Liability to pay service tax on amount received prior to 1.7.2010 for leasing vacant land.

Analysis:
The judgment concerns the liability of an appellant to pay service tax on the amount received before 1.7.2010 for leasing vacant land. The appellant had leased their land for 99 years to three customers and collected rent during the period from 5.8.2008 to 20.1.2010. The issue arose as the activity of leasing vacant land became taxable from 1.7.2010 due to an amendment in the definition of immovable property under section 65(105)(zzzz). The department contended that advances received for taxable services before 1.7.2010 were subject to service tax, relying on Notification No. 36/2010-ST. Show Cause Notices were issued, and the original authority confirmed the demand, interest, and penalties, which were upheld by the Commissioner (Appeals), leading to the appeal.

The appellant argued that since the activity of leasing vacant land became taxable only from 1.7.2010, the demand for service tax on amounts received before this date was unjustified. They cited a decision of the Hon'ble High Court of Allahabad in a similar case to support their position. The Tribunal examined the contentions of both sides and analyzed the legal provisions and precedents. It noted that the department's view, based on Notification No. 36/2010-ST, was erroneous. The Tribunal emphasized that if the appellant received any rent after 1.7.2010, it might be taxable, but in this case, there was no such allegation. Therefore, the demand for service tax on amounts received before 1.7.2010 was deemed unsustainable.

The Tribunal further referred to the decision of the Hon'ble High Court of Allahabad in the case of Greater Noida Industrial Development Authority, which clarified the scope of taxable services related to leasing vacant land. Additionally, the Tribunal cited a similar decision involving Tuticorin Port Trust to support its conclusion. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any. The judgment was pronounced on 31.1.2022 by the Appellate Tribunal CESTAT Chennai, consisting of Ms. Sulekha Beevi C.S., Member (Judicial), and Shri P. Anjani Kumar, Member (Technical).

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