2025 (9) TMI 260 - AT - Service Tax

Renting godown for state warehousing storage in 2012-13 not taxable under Negative List; no deliberate suppression found

CESTAT held that renting a godown to a state warehousing corporation for storage of agricultural produce during 2012-13 did not attract service tax under ... Non-payment of service tax - renting out godown for consideration to Rajasthan State Warehousing Corporation for warehousing agricultural produce during the period 2012-2013 - applicability of time limitation - suppression of facts or not - Reliability of CBEC instruction no.B11/1/2002-TRU dated 01.08.2002 clarifying that mere renting of space cannot be said to be in nature of service provided for storage or warehousing of goods - HELD THAT:- From the facts of the case it is seen that the appellant had been filing their ST-3 Return regularly and paying service tax on the taxable services provided by them. However, the appellant did not pay service tax on the services provided by them to Rajasthan State Warehousing Corporation on the belief that it was exempted as it was for storage of agricultural produce. As per rent agreement, the structure of warehouse has tin shed roof and it was rented for storage of agricultural produce. Hence the activity of appellant gets covered under the above clarification. Also, there is no denial to the fact that appellant leased out the godown/ warehouse for storage of agricultural produce. Hon’ble Apex Court in Krishi Upaj [2017 (5) TMI 1465 - CESTAT NEW DELHI] has held 'Service Tax in respect of shed/shop/premises leased out to traders/others for storage of agricultural produce in marketing area not payable, with introduction of Negative List Regime of Taxation w.e.f. 1-7-2012 - However, Negative List not covers activities of renting of immovable property for other than agricultural produce.' Extended period of limitation - suppression of facts or not - HELD THAT:- The submissions of the learned Chartered Accountant that there was no suppression with intention to evade payment of tax cannot be disregarded. Further, it is found that the circumstances under which the extended period can be invoked has been laid down by Supreme Court in Pushpam Pharmaceuticals Company vs. Commissioner of Central Excise, Bombay [1995 (3) TMI 100 - SUPREME COURT] has held that 'A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.' It is noted that the department has not led evidence regarding any positive act on part of the appellant which may amount to suppression, with an intent to evade payment of duty. We draw support from Hon’ble Supreme Court’s decision in Anand Nishikam Co. Ltd. vs. Commissions of Central Excise, Meerut [2005 (9) TMI 331 - SUPREME COURT], wherein it was held that suppression of facts can have only meaning that the correct information was not disclosed deliberately to evade payment of duty when facts were known to both the parties. In the instant case, there is no such evidence before us to justify the invocation of extended period. Reliability of CBEC instruction no.B11/1/2002-TRU dated 01.08.2002 clarifying that mere renting of space cannot be said to be in nature of service provided for storage or warehousing of goods - HELD THAT:- As per the rent agreement appellant was responsible for creating space for storage of wheat and also for pest control to safeguard the stored agricultural produce. There is no evidence to the contrary. Hence, it is held that the said instruction is not applicable in the present case. The impugned order is set aside and the appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether charges for renting a godown/warehouse used for storage of agricultural produce are taxable service after introduction of the Negative List regime w.e.f. 01.07.2012 (i.e., whether such activity falls within the exclusion/Declared Service under Section 66E/negative list entry). 2. Whether extended period of limitation could be invoked on the ground of suppression, fraud, collusion or willful misstatement where the appellant had not paid service tax for godown-renting during 2012-13. 3. Whether mere renting of space (godown) can be treated as a taxable 'storage/warehousing' service where the lessor had responsibilities (e.g., pest control, creation/maintenance of storage space) in relation to the stored agricultural produce. 4. Whether reliance on departmental/CBEC instructions and classification precedents defeats the appellant's bona fide belief and precludes benefit of limitation or exemption. ISSUE-WISE DETAILED ANALYSIS Issue 1: Taxability of renting godown used for storage of agricultural produce post 01.07.2012 (Negative List / Declared Service). Legal framework: Under the Finance Act, services listed in the Negative List/Declared Service regime from 01.07.2012 exclude certain activities relating to agriculture and agricultural produce (referenced under Section 66D(d)(iv)/(v) and Section 66E(a) as applicable to storage/warehousing of agricultural produce). Prior to 01.07.2012, renting of immovable property was taxable under pre-existing definitions. Precedent treatment: Tribunal authority held in earlier decisions that sheds/premises leased out for storage of agricultural produce in market areas are not liable to service tax w.e.f. 01.07.2012 under the Negative List regime; decisions relied upon by the appellant were followed. Interpretation and reasoning: The Tribunal examined the rent agreement and contemporaneous documentary evidence showing the premises were leased for storage of wheat (an agricultural produce) and that the structure had a tin-shed roof incidental to its agricultural use. The Tribunal also considered administrative guidance (Education Guide para 4.4.9) clarifying that leasing of vacant land with a storage shed incidental to agricultural use is covered by the negative list. On these facts the renting activity was held to be within the Negative List exclusion for services relating to agriculture/agricultural produce from 01.07.2012. Ratio vs. Obiter: Ratio - where a structure is rented specifically and demonstrably for storage of agricultural produce and the structure is incidental to agricultural use, the activity falls within the Negative List exclusion and is not taxable post 01.07.2012. Obiter - general observations about other factual permutations of renting of immovable property where the lessee uses premises for non-agricultural storage. Conclusion: The renting of the godown for warehousing of agricultural produce was not taxable w.e.f. 01.07.2012 as it fell under the Negative List/Declared Service exclusion; therefore, demand for service tax for the period after that date could not be sustained on the facts proved. Issue 2: Invocation of extended period of limitation for suppression, and effect of bona fide belief. Legal framework: Extended limitation for tax recovery is permissible where there is fraud, collusion, willful misstatement or suppression of facts; the concept of suppression requires deliberate non-disclosure of known material facts. Precedent treatment: The Tribunal applied principles from higher court authorities emphasizing that 'suppression' must be deliberate and deliberate nondisclosure of correct information when facts were known to both parties; inadvertent omission or bona fide belief does not amount to suppression. Decisions cited explain that proviso to the re-opening provision must be strictly construed. Interpretation and reasoning: The Tribunal considered that appellant had filed returns regularly, had documentary grounds for a bona fide belief that renting for agricultural storage was not taxable (including State Government opinion and contemporaneous documents), and there was no evidence of a positive act amounting to deliberate suppression. The department failed to produce evidence showing appellant deliberately concealed relevant facts to evade tax. Given absence of evidence of intent, the extended period could not be invoked. Ratio vs. Obiter: Ratio - extended limitation cannot be invoked without evidence of deliberate suppression/fraud/collusion; bona fide belief supported by contemporaneous documents negates invocation of extended period. Obiter - commentary on the standard of proof required to establish suppression. Conclusion: Extended period for assessment was not invocable on the facts; the demand based on extended limitation was set aside. Issue 3: Whether 'mere renting' vs. providing warehousing-related services (security, pest control, loading/unloading) affects taxability. Legal framework: Departmental position and CBEC instruction distinguish between mere renting of space (which may be taxable as renting of immovable property) and provision of warehousing/storage services (which may fall under Negative List if related to agricultural produce). Classification depends on the nature of services actually provided, not merely the label. Precedent treatment: Departmental instruction earlier stated mere renting of space is not same as storage/warehousing service; however, factual distinctions in precedents recognize liability where lessor does not undertake activities incidental to storage. Interpretation and reasoning: The Tribunal examined the rent agreement and godown renting report showing the lessor's responsibilities included creating space for storage and pest control to safeguard stored agricultural produce. On these facts the lessor performed services incidental to storage/warehousing of agricultural produce rather than merely letting out space. Accordingly, the departmental instruction against classifying mere renting as warehousing service was found inapplicable where the lessor had demonstrable responsibilities for the stored goods. Ratio vs. Obiter: Ratio - where the lessor undertakes obligations (e.g., pest control, provision/maintenance of storage space) essential to preservation of agricultural produce, the activity cannot be treated as mere letting of immovable property and will be considered in the context of Negative List/declared services. Obiter - general guidance on evidentiary thresholds for distinguishing acts of a lessor from services provided by a storage operator. Conclusion: On the proved facts (responsibility for pest control and creation/maintenance of storage space), the appellant's activity could not be dismissed as mere renting; it supported classification within services relating to storage/warehousing of agricultural produce covered by the Negative List. Issue 4: Effect of departmental instructions and State authority opinion on taxpayer's bona fide belief and tax liability. Legal framework: Administrative instructions and contemporaneous governmental opinions may inform taxpayer's bona fide belief and are relevant in assessing intent/suppression; classification remains a legal question but reasonable reliance on official guidance is material to penalty/limitation consequences. Precedent treatment: Courts have recognized that bona fide belief based on official instructions/opinions and the factual matrix can negate malicious intent required for invocation of extended limitation or punitive penalties. Interpretation and reasoning: The Tribunal noted the appellant had contemporaneous State Government opinion and guidance in the Education Guide indicating leasing with a storage shed incidental to agricultural use falls within the Negative List. These materials reinforced appellant's bona fide belief that service tax was not payable. In absence of contrary evidence of deliberate concealment or misstatement, reliance on such guidance established absence of culpable mental element needed for extended period and penalty under the invoked provisions. Ratio vs. Obiter: Ratio - bona fide reliance on contemporaneous official guidance and facts shown by documentary evidence negates culpable suppression and affects applicability of extended limitation and penalties. Obiter - extent to which different administrative notes may be determinative in other fact situations. Conclusion: Departmental/State opinions and administrative guidance supported appellant's bona fide belief; thus they weighed against findings of suppression or willful default and detracted from the applicability of extended period and penalties. Overall Conclusion by the Tribunal The demand, interest and penalties imposed for the impugned period were not sustainable on the proved facts: (a) the renting/warehousing activity was covered by the Negative List for storage of agricultural produce w.e.f. 01.07.2012; (b) there was no evidence of deliberate suppression to invoke extended limitation; and (c) the departmental instruction relying on distinction between mere renting and warehousing was inapplicable given the lessor's obligations (e.g., pest control). The impugned order was set aside and the appeal allowed.