TaxTMI 
TaxTMI 
2017 (5) TMI 673
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.... Ravichandran These are 69 appeals filed by the appellant involving identical set of facts and covering the dispute of service tax liability on various charges collected by the appellant from the allottees of land. All these appeals are taken up together for disposal. 2. Briefly stated, the appellants are a company incorporated by the Government of Rajasthan under Companies Act, 1956. They are promoted and fully subscribed by the Government of Rajasthan and are engaged in development of industrial areas, export promotion parks, growth centres, SEZ etc. The appellant are registered with Service Tax department under the category of 'Management, Maintenance and Repair Service' and 'Renting of Immovable Property Service'. The dispute in the present set of appeals mainly revolves around the various charges collected by the appellant from the allottees of land. For the development of industrial areas, Government of Rajasthan allots vacant land on 99 years long term lease to the appellant in terms of Rajasthan Industrial Areas Allotment Rules, 1959 issued under Rajasthan Land Revenue Act, 1956. Such land is further allotted by the appellant to various allottees against payment of 'D....
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....The learned Counsel appearing on behalf of the appellant submitted, elaborately, against the findings of the lower authorities on the liability of the appellant for service tax. He submitted that out of various charges collected by the appellant on which service tax liability has been confirmed, the most significant amount is relating to development charges/value of land received as lump sum premium (salami) amount. More than 90% (Rs. 183 crores) of the service tax demand relates to these charges. The main submissions of the learned Counsel can be summarized as below :- (a) the land in State of Rajasthan is "lease hold land". Allotment is made to the appellant by the Government and the appellant in turn allots the land to various persons. The land allotment by the appellant constitutes 'sale'. The allotment of land/plot by the appellant cannot be treated akin to renting/leasing of immovable property because, in true sense, it is virtually a sale and cannot be treated as a normal renting or leasing for service tax purpose ; (b) the premium/salami received by the appellant as development charges is nothing but price paid for obtaining the lease. It precedes the gran....
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....milarly, the regularization charges have no nexus to any service provided by the appellant ; (iii) transfer charges cannot be taxed under the category 'Real Estate Agent Service'. They are not acting as agent between the buyer and seller of land. The charges are for taking note of the change in the lessee and administrative expense thereto. This record is maintained as part of 'municipal function'. (f) the demand wherever made invoking extended period is not tenable. The appellant is a Government authority who cannot be attributed with malafide motive to evade payment of service tax. They were duly registered with the Department and were discharging service tax wherever applicable, regularly. On the same ground penalties cannot be imposed on the appellant. The issues involved were of legal interpretation and the appellant being a Government authority entertained a bonafide belief on their non-liability to service tax on various charges, discussed above. 6. The learned AR strongly contested the submissions made on behalf of the appellant. To begin with, it is submitted that the appellants are a body corporate registered as a company and, as such, cannot be equat....
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....e premium is a price paid for obtaining the lease of an immovable property. The learned AR submitted that the treatment of Income Tax Act with reference to various types of incomes has no direct relevance while considering the provisions of Section 67 of the Finance Act, 1994. The provisions of Income Tax Act are having specific scope, purpose and intend, as decided by the legislature. The same cannot be referred to for deciding taxable value with reference to service tax which is entirely on a different footing. Section 67 does not provide for such split up of consideration for service. In fact, the Government provided for partial exemption of consideration received, in long term lease arrangement, by issuing Notification No.41/2016-ST dated 22/09/2016. The said notification exempts service tax leviable on one time upfront amount (called as premium, salami, cost, price, development charges or by other name) payable for such lease. As such, it is clear that prior to 22/09/2016 the said amount is liable to service tax. 8. The learned AR further elaborated on the concept of 'virtual sale' or 'deemed sale' of the land claimed by the appellant. He submitted that there is no concept ....
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..... The learned AR also stated that the introduction of new Section 104 in Finance Act, 1994 through an amendment by Finance Act, 2017 extended the relief to the appellant in respect of one time upfront payment received for leasing out of industrial plot for more than 30 years. On tax liability of economic rent and other charges received by the appellant, he reiterated his earlier submission in support of the findings by the lower authorities. 13. We have heard both the sides and perused the appeal records, written submissions and various case laws referred to. The appellant is a company incorporated with the object of increasing the industrialization in the State of Rajasthan. One of their main activity is to allot and transfer vacant land to entrepreneurs for setting up of industrial units and allied purposes. The appellant is free to devise its own plan for industrial development, earmarking industrial vacant lands and further allotting the same for industrial and allied purposes. The terms and conditions under the scheme are notified by the appellant. The appellants allotted different plots to entrepreneurs and others for the stated purpose. The appellants recovered developmen....
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....plex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, [(v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce;] but does not include - (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2. - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;" Section 65B (44) w.e.f. 01/07/2012 : ....
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....scribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.'.] [(b) * * * * ] (c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]]" 15. Admittedly, substantial part of the demand against the appellant in various proceedings, relate to their service tax liability on lump-sum premium amount, received by them from the allottees on allotment of land on long term basis. In view of the introduction of new Section 104 in the Finance Act, 1994 the appellant's liability on such considera....
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....at on the similar matter, this Tribunal has examined this very same issue in the case of Greater Noida Industrial Development Authority (supra) and upheld the service tax liability on such charges. The said decision of the Tribunal has been upheld by the Hon'ble Allahabad High Court as noted earlier in this order. As such, we hold that the appellants are liable for service tax on the lease rent/economic rent received periodically, on the lands allotted for industrial purpose for the period post 01/07/2010. 18. The appellants also received various other considerations, under different names. Retention charges are collected from the allottees of the land who failed to construct the building or commence commercial production within the specified period mentioned in the land allotment agreement/letter. Restoration charges are collected from allottees who failed to start the production within the prescribed time or committed any breach of condition of lease or allotment, which may entail cancellation of allotment. However, on an application from allottee for restoration of the allotment of the plot, the appellants restore the plot to the original allottee in terms of Rule 24 (3) of R....
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....ntinued enjoyment of lease property is closely linked to the above considerations and, as such, we find the appellants are liable to service tax on the same. 21. The appellants also collected service charges/fire charges from the allottees of the plot. They have submitted that these charges are collected to upkeep and maintain the industrial areas and also to maintain fire station in the said areas. The appellants claimed that repair and maintenance of roads is exempted from payment of service tax in terms of Section 97 of the Finance Act, 1994. The said exemption has been made applicable from 16/06/2005 upto 26/07/2009. Thereafter exemption Notification 24/2009-ST dated 27/07/2009 and Notification No.54/2010-ST dated 21/12/2010 are applicable. We agree with the contention of the appellant on this issue. Wherever any charges are collected by the appellants towards repair and maintenance of roads, the same shall not be liable to service tax under the category of management, maintenance and repair service. 22. However, regarding other services rendered by the appellant to the allottees in the industrial areas, we find no exemption is available. The claim of the appellant that t....
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.... out municipal function in their industrial areas as laid down in the Municipal Act, 2009 and the municipal body of the concerned area does not undertake such work in the industrial areas falling under the jurisdiction of the appellant. The matter was further clarified by the Ministry of Finance, Government of India, vide a letter dated 10/01/2017 of Joint Secretary (TRU - II), to the effect that the appellant shall be eligible for exemption from service tax in respect of functions entrusted to them in terms of Article 243W of the constitution w.e.f. 30/01/2014. We note that the 12th Schedule of the Constitution specifies fire services/public amenities including street lightings, parking lights, public convenience etc. as the nature of services to be provided by the municipalities. As such we hold that appellant are liable service tax for the period prior to 30/01/2004 as no exemption is available to them. 23. The appellants were also receiving transfer charges as per Rule 18 of RIICO Rules. The transfer of plot is subject to payment of transfer fee. These transfers from one allottee to another or due to change in composition of the allottee, are permitted by the appellant. The ....
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....olutions Retail Ltd. vs. Union of India reported in 2011 (21) S.T.R. 109 (Del.) held that renting per-se is not a taxable service. Service in relation to renting only can be subjected to service tax. It led to statutory amendments, including retrospective amendments, in the provisions of Finance Act, 1994. Keeping these facts in view, we find there is no justification to allege fraud, collusion, willful mis-statement on the part of the appellant with an intention to evade payment of service tax. In fact, substantial service tax liability of the appellant [and similarly placed Industrial Development Corporations of the States] has been exempted by a special legislative provision, introduced in Finance Act, 2017 but made effective from 01/06/2007. As such, we find the demands for extended period are not sustainable against the appellant. On the same reasoning we hold that the penalties imposed on the appellant are also liable to be set aside. 25. The appellants claimed benefit of calculation of service tax by applying the provision of Section 67 (2) of the Finance Act, 1994. Section 67 (2) stipulates as below :- "Where the gross amount charged by a service provider, for t....