Leasehold Rights Sale Not Renting, No Service Tax Due; Tribunal Sides with Appellant, Cites Limitation Bar.

The Tribunal concluded that the permanent assignment of leasehold rights by the Appellant is a "sale of leasehold rights" and not "renting," thus not subject to service tax under Section 65(105)(zzzz) of the Finance Act, 1994. The one-time premium or salami received was deemed not equivalent to rent and therefore not taxable. Additionally, the demand notice was barred by limitation, as the investigation began over two years after the Appellant had provided all relevant information. Consequently, the Tribunal set aside the order demanding service tax, interest, and penalties, and allowed the Appellant's appeal, disposing of the Respondent's cross-objection.

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Issues Involved:
1. Classification of permanent assignment of leasehold rights as "Renting of Immovable Property."
2. Applicability of service tax on the premium or salami received.
3. Limitation period for issuing the demand notice.

Summary:

Issue 1: Classification of Permanent Assignment
The core issue was whether the permanent assignment of land by the Appellant to business entities falls under the definition of "Renting of Immovable Property" as per Section 65(105)(zzzz) of the Finance Act, 1994, effective from 01.07.2010. The Tribunal analyzed the definitions and observed that the assignment involved permanent transfer of leasehold rights without any reversionary rights to the Appellant. The Tribunal concluded that this transaction should be treated as a "sale of leasehold rights" and not as "sub-lease" or "renting," thus not falling under the purview of service tax.

Issue 2: Applicability of Service Tax on Premium or Salami
The Tribunal examined whether the one-time premium or salami received by the Appellant could be equated with rent. Referring to the distinction between premium and rent as per Section 105 of the Transfer of Property Act, 1882, and supported by judicial precedents, the Tribunal held that the premium received for permanent transfer of leasehold rights is not subject to service tax. The Tribunal cited the decision in Greater Noida Industrial Development Authority vs Commissioner of Central Excise and Service Tax, Noida, which held that salami or premium received for lease of immovable property is not exigible to service tax.

Issue 3: Limitation Period for Issuing Demand Notice
The Appellant argued that the entire demand is barred by limitation as they were registered under the category of "Renting of Immovable Property" and were paying service tax regularly. The Tribunal found merit in this argument, noting that the department initiated the investigation on 13.08.2013 and issued the notice on 11.06.2015, more than two years after receiving all relevant information. The Tribunal held that there was no suppression of information by the Appellant and the demand was barred by limitation.

Conclusion:
The Tribunal set aside the impugned order demanding service tax along with interest and penalty, and allowed the appeal filed by the Appellant. The Service Tax Cross Objection filed by the Respondent was also disposed of.

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