TaxTMI 
TaxTMI 
2019 (8) TMI 386
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.... - 31.03.2014 01.04.2013 - 31.03.2014 OIO/Demand Notice Date 29.08.2013 06.05.2014 27.02.2015 23.03.2015 14.08.2015 Demand Rs 1345600263 954881928 954881928 448081545 448081545 Interest Section 75 Not Quantified Section 76 Yes No No No No Section 77 5000 No No No No Section 78 1345600263 No No No No 2.2 Appellant is a limited company incorporated under Companies Act, 1956 as subsidiary of State Industrial and Investment Corporation of Maharashtra Limited which is wholly held owned by state of Maharashtra 2.3 The Government of Maharashtra acquired lands in the project area from land owners under Land Acquisition Act On such acquisition, the ownership of the land vested in the Government of Maharashtra vide Section 16 or 17(1) of Land Acquisition Act, 1894 and always continued to remain with the Government only. For the purposes of development of the project area, the Government placed the said land at their disposal. Appellants after following the procedure leased the land to various private persons. 2.4 For the purpose of leasing the land appellants first enter into an agreem....
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....g the demand has been wrongly invoked, despite there being many reasons to show that there was no suppression. xi. Decisions of Tribunal in case of Greater Noida Industrial Development Authority [2013 TIOL 44 (T-Del)] Bombay High Court in Percival Joseph Pareira vs The Special Land Acquisition Officer, ITAT in their own case reported at {[2012] 25 taxmann.com 333 (Mum)]} and Hon'ble Supreme Court in case of U T Chandigarh Administration Vs Amarjeet Singh [2009 (4) SCC 660] have been ignored xii. Commissioner has relied on the law which was not applicable during the period in dispute. xiii. Alternative submissions have not been taken into account. xiv. Consequential interest and penalties have been wrongly imposed. 4.1 We have heard Shri V Sridharan, Sr. Advocate with Shri Vinay Jain, Chartered Accountant for the Appellants and Shri Roopam Kapoor, Principal Commissioner and Shri M K Sarangi, Additional Commissioner, Authorized Representatives for the revenue. 4.2 Arguing for the appellants learned counsel Submitted- i. For the period prior to 01.07.2010 taxable service under Section 65(105)(zzzz) is renting of immovable property. Va....
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....ve contention that is being raised by the appellants herein. The contention of the Appellants is not that because the lease is long term, it is not included in the definition of renting of immovable property. It is also not their contention that the lease is a transfer of capital asset and thus not leviable to service tax. What is taxable under Section 65(105)(zzzz) read with Section 65(90a) is consideration for use of immovable property and not the consideration for transfer of immovable property (i.e lease premium). In case of Kagal Nagar Parishad [2018-TIOL-1760-CESTAT-Mum] by placing reliance on case of Greater Noida Industrial Development Authority, it has been held that one time premium is not taxable. Hon'ble Tripura High Court has in case of Hobbs Breweries taken a contrary view. Decision of Tripura High Court has been followed in case of RIICO. v. The decision of Hon'ble Bombay High Court in case of Builder Association of India [2018 (12) GSTL 232 (Bom)] is rendered in the context of Goods and Service Tax, and does not hold that in the Service Tax regime, one time premium will be leviable to tax. This decision do not even remotely hold that one time lease premium ....
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....in any case entitled to exemption under Notification No 25/2012-ST after its amendment by Notification No 2/2014-ST wef 30.01.2014. RIICO [2018 (10) GSTL 92 (T-Del)] x. Appellant is merely an agent of the Government of Maharashtra. {CIDCO vs Percival Joseph Pareira [2013 (4) Mh. L J-762] Land is owned by government. Consequently, lease premium also belongs to government. Article 289(1) exempts the property of State from Union Taxation. Thus no service tax is payable. xi. In case of New Delhi Municipal Corporation vs State of Punjab [1997 (7) SCC 339], a nine member bench of Hon'ble Apex Court held that granting of lease is not in the nature of trade or business and such activity would be exempt from Union taxation. xii. Allotment of plots by Appellant (as an agent of the state of Maharashtra) is a statutory function qua the land owned by the government which could be performed only buy the state and therefore does not amount to service. Reliance is placed on:- • Circular No 89/7/2006-ST dated 18.12.20006 • Maharashtra Industrial Development Corporation [2014 (36) STR 1291 9T-Mum)], {2017-TIOL-2629- HC-MUM-ST] xiii. Exten....
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....ce considered the issue vis a vis Article 289 of Constitution and has held in favour of taxation of such transactions of state. iv. Appellants had not given the details of the case wherein the demand of service tax has been made in respect plots allocated for residential purpose. v. The counsel for appellant while submitting that tribunal has in various decision held that leasing of vacant land was taxable w.e.f 1.07.2010, he has only sought to raise a new issue to the effect that only the further leasing of already leased land alone is taxable from 1.07.2010. It is only twisting word of statue which have been correctly interpreted by the court or tribunal. vi. Appellants are not correct in contending that issue in respect of taxability of vacant land has been decided by the Hon'ble High Court of Allahabad. The issue of one time premium as well as taxability prior to 2010 has been left open for the Commissioner to decide and the appellants were free to challenge the same by raising all legal as well as factual issues. vii. The issue of one time premium has not been decided by the Allahabad High Court but has been considered and decided by the Tri....
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....105)(zzzz) Service Tax can be levied on the lease of vacant land given by the Appellants. ii. Whether the lease premium recovered from the lessee against agreement to lease entered into by appellants is subjected to service tax under the taxable category. iii. Whether the activities undertaken by the appellant qualify to be service as defined by Section 65B(44) of Finance Act, 1994 with effect from 1st July 2012 iv. Whether appellants qualify to be the government authority for the purpose of exemption notification No 25/2012-ST. v. Whether the extended period of limitation can be invoked in the facts and circumstances of this case for making the demand of service. vi. Whether appellants are liable to pay interest on the service tax short paid/ not paid by them by the due date. vii. Whether penalties under Section 76, 77 and 78 are imposable on the appellants. viii. Levy of Service Tax on the plots leased and intended for residential use and for hotels. 5.3 Whether in terms of the 65(105)(zzzz) Service Tax can be levied on the lease of vacant land given by the Appellants:- 5.3.1 Appellants have divided the period f....
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....substituted and shall be deemed to have been substituted with effect from the 1st day of June, 2007, namely:- "to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or for furtherance of, business or commerce."; (ii) in Explanation 1, after item (iv), the following item shall be inserted, namely:-- "(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;"; 5.3.4 The section as amended was given retrospective effect by the validation provisions incorporated in section 77 of the Finance Act, 2010. This section is reproduced below: "Section 77: Validation of Action Taken under sub clause (zzzz) of clause (105) of Section 65 Any action taken or anything done or omitted to be done or purported to have been taken or done or omitted to be done under sub-clause (zzzz) of clause (105) of section 65 of the Finance Act, 1994(32 of 1994), at any time during the period commencing on and from the 1st day of June, 2007 and ending with the day, the Finance ....
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....ttract Service Tax under Section 65(105)(zzzz) read with Section 65(90a) from 1-6-2007, the date on which the Service Tax on renting of immovable property had become leviable or the same is chargeable w.e.f. 1-7-2010 when clause (v) was added to the inclusive portion of the definition of 'immovable property' in Section 65(105)(zzzz) and whether for this purpose, the long term leases of vacant land are excluded from the purview of Section 65(105(zzzz) read with Section 65(90a) of the Act? 9.1 The question as to whether giving vacant land on lease, lease or rent for construction of a building or temporary structure at a later stage for furtherance of business or commerce is taxable from 1-6-2007, the date on which the Service Tax on renting of immovable property had been introduced or w.e.f. 1-7-2010 when Clause (v) had been added to the Explanation-I to Section 65(105)(zzzz) has been examined by this Tribunal in detail in its Final Order No. ST/A/58664/2013-CU(DB), dated 11- 12-2013 in the case of New Okhla Industrial Development Authority v. Commissioner of Customs, Central Excise & Service Tax, Noida, wherein it was held that since prior to 1-7-2010, vacant land solely us....
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.... 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 75 of the Finance Act, 2010 introduced several amendments to Chapter V of the Act. In so far as Section 65(105)(zzzz), the 2010 amendments substituted the main provision of sub-clause (zzzz) and enjoined this substitution to operate with retrospective effect from 1-6- 2007. Sub-clause (v) was also introduced, to Explanation (1) in the provision. This sub-clause read....
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....tion of renting of immovable property as the taxable event read with the inclusionary and exclusionary clauses (in particular sub-clause (b) of the exclusionary clause) in Section 65(105)(zzzz), renting of vacant land was clearly outside the purview of the taxable service, prior to 1-7-2010. 12. Introduction of sub-clause (v) in Explanation 1 has significantly altered and extended the scope of the taxable service, with effect from 1-7-2010 and consequently vacant land given on lease or licence, for construction of a building or a temporary structure, to be used at a later stage for furtherance of business or commerce, would be "immovable property" and renting of this immovable property would be the taxable service, since 1-7-2010." 5.3.6 This decision of tribunal has been upheld by the Hon'ble Allahabad High Court at [2015 (40) STR 95 (ALL)] stating as follows: "4. With effect from 1st June, 2007, Section- 65(105)(zzzz) was introduced in Finance Act, 1994. The section provides for Service Tax to be levied on service provided to a person by any other person of renting of immovable property or any other service in relation of such renting for use in course of, or....
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....nce notice was already issued on this aspect despite the fact that second notice pertain the different period and different items/transactions which were subject matter of Service Tax provided under first notice? (ii) Whether long terms leases in respect of vacant land would be covered by "taxable service" under Section 65(105)(zzzz) of Finance Act, 1994? (iii) Whether Greater Noida Industrial Development, Noida constituted under the Industrial Development Act, 1976 can be said to be a body discharging "sovereign functions" and outside the purview of Service Tax? (iv) Whether the leases granted in respect of vacant land by appellant before 1-7-2010 would be taxable under the aforesaid statute?" 17. Learned counsel for the appellant vehemently submitted before us that the activities assigned to the assessee were sovereign/public/statutory duties. It is their case that the long term lease of vacant land for 90 years or lease in perpetuity of vacant land was not taxable under Section 65(105)(zzzz) of the Finance Act, 1994 specifically in the circumstance when the Tribunal itself has come to a conclusion that the premium charged for such lease will n....
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....nts to transfer of ownership of the land does not appeal to us especially in view of the simple meaning of the language use in the aforesaid sections. 22. The judgment of the Apex Court in the case of R.K. Palshikar (HUF) v. Commissioner of Income Tax reported in (1988) 3 SCC 594 relied upon by the assessee deals with the transfer of property within the meaning of Section 12-B of the Income Tax Act and is, therefore, clearly distinguishable in the facts of the case. 23. The Tribunal appears to be justified in recording that the letting of vacant land by way of lease or license irrespective of the duration or tenure for construction of building or temporary construction for use in the course or furtherance of business or commerce is taxable w.e.f. 1st July, 2010 in view of Clause (v) of Explanation 1 to Section 65(105)(zzzz) of the Finance Act, 1994. 24. So far as the term lease is concerned, it may be recorded that it has not been defined under the Finance Act, 1994. The term "lease" would cover a lease for any period including a lease in perpetuity, as will follow from simple reading of Section 65(90a). The Finance Act, 1994 does not carve out any distin....
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.... plea of the appellant that it is performing statutory duties and is a creation of a statute and therefore cannot be subjected to Service Tax does not appeal to us. Suffice is to mention that the Finance Act, 1994 makes no distinction between a statutory body i.e. a juristic person and an individual. 31. As far as the circular dated 23rd August, 2007 issued by the Government of India, which has been so heavily relied upon by the appellant is concerned, we may record that under Clause 032.01, it has been provided that the Prasar Bharati Corporation (Doordarshan and All India Radio), which has been constituted under the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is liable to pay Service Tax for broadcasting services. 32. Similarly under Clause 999.01 with regard to the sovereign/public duties/functions, it has been clarified that activities assigned to and performed by the sovereign/public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of a compulsory levy and are deposited into the Government account. Such act....
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....10) signalled, through the inclusionary clause various facets of transactions which would also amount to renting of "immovable property". On established principles of statutory interpretation, normally an inclusionary clause does not limit the plentitude of an enacting provision couched in broad terms. Thus the illustrations of what are "immovable property", set out in the inclusionary clause in Explanation 1 would not derogate from "vacant land" being comprehended within the expression "renting of immovable property". However, clause (zzzz) has an exclusionary clause as well, enumerating the subjects excluded from the ambit of "immovable property". Under this exclusionary dispensation; in sub-clause (a) vacant land solely used for agricultural, aquaculture. farming, forestry, animal husbandry, mining purposes; in sub-clause (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; and in sub-clause (c) land used for educational, sports, circus, entertainment and parking purpose, are excluded from the purview of "immovable property'. On a true and fair construction of the exclusionary clause, the legislative intent is compelling that vacan....
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.... [1958] S. C. R. 1422; J. K. Jute Mills Co. Ltd. v. The State of Uttar Pradesh and Anr. 12. S.T.C. 429; Chhotabhai Jethabhai Patel and Co. v. The Union of India and Anr. [1962] Supp, (2) S.C.R. p. 1; Sri Ramkrishna & Ors. v. The State of Bihar. [1964] 1 S.C.R. 897.; In the last mentioned case it was specifically decided that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but it can also provide for the retrospective operation of the said provisions." In case of Jyoti Traders [1999 (112) STC 277 (SC)] Hon'ble Supreme Court stated- "26. The two decisions in the cases of The Ahmedabad Manufacturing & Calico Printing Co. Ltd. and Biswanath Jhunjhunwalla & Anr. are more closer to the issue involved in the present case before us. They laid down that it is the language of the provision that matters and when meaning is clear, it has to be given full effect. In both these cases this Court held that the proviso which amended the existing provision gave it retrospectivity. When the provision of law is explicit, it has to operate fully and there could not be any limits to its operation. Th....
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....ction activities thereon. It is only after completion of construction activities and issuance of a completion certificate that lease deed is executed between them and the lessee. The lease deed prescribes the lease rent which alone can be subjected to service tax. 5.4.2 The value of taxable service provided is determined as per section 67 of Finance Act, 1994 which read as follows: "67. (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service prov....
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....d with the nature of the tax. The distinction was observed by a Special Bench of the Patna High Court in Atma Ram Budhia v. State of Bihar - AIR 1952 Patna 359, where a tax on passengers and goods assessed as a rate on the fares and freights payable by the owners of the motor vehicles. Atma Ram Budhia (supra) was referred to with approval by this Court in M/s. Sainik Motors, Jodhpur and Others v. The State of Rajasthan - (1962) 1 S.C.R. 517. This Court in that case repelled the contention that the levy was a tax upon income and not upon passengers and goods. It pointed out that "though the measure of the tax is furnished by the fares and freights it does not cease to be a tax on passengers and goods". The point was considered by this Court again in D.C. Gouse and Co. etc. v. State of Kerala & Anr. etc. - (1980) 1 S.C.R. 804, where reference was made to the measure adopted for the purpose of the levy of tax on buildings under the Kerala Building Tax Act. The Court examined the different modes available to the Legislature for measuring the levy, and upheld the action of the Legislature in linking the levy with the annual value of the building and prescribing a uniform formula for det....
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.... by this Court in The Hingir- Rampur Coal Co. Ltd. and Others v. The State of Orissa and Others - (1961) 2 S.C.R. 537, where the form in which the levy was imposed was held to be an impermissible test for defining in itself the character of the levy. It was observed :- "...... the mere fact that the levy imposed by the impugned Act had adopted the method of determining the rate of the levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances." It is apparent, therefore, that when enacting a measure to serve as a standard for assessing the levy the Legislature need not contour it along lines which spell out the character of the levy itself. Viewed from this standpoint, it is not possible to accept the contention that because the levy of excise is a levy on goods manufactured or produced the value of an excisable article must be limited to the manufacturing cost plus the manufacturing profit. We are of opinion that a broader based standard of....
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.... the old Section 4 and the new Section 4, the price charged by the manufacturer on a sale by him represents the measure. Price and sale are related concepts, and price has a definite connotation. The "value" of the excisable article has to be computed with reference to the price charged by the manufacturer, the computation being made in accordance with the terms of Section 4." 5.4.4 In accordance with the above Section 67, prescribes the mode for determining the measure of levy. From the perusal of section 67(1) it is evident that the section itself envisages that the entire consideration received for the provision of the service, either provided or to be provided should constitute the taxable value. Consideration itself has been defined inclusively to include all the amount paid or payable for the taxable service provided or to be provided. Appellants contended that lease premium has been received by them against the "Agreement to Lease" and is prior to entering into lease deed with the lessee and hence should not be part of the taxable value. On perusal of the sample copy of "Agreement to Lease", on page 2, it is stated as follows: Whereas (a) The Corporation....
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....PLIANCE WITH THE MAHARASTRA REGIONAL AND TOWN PLANNING ACT, 1966 AND NAVI MUMBAI DISPOSAL OF LANDS REGULATIONS, 1975 7A It is hereby agreed and declared by and between parties hereto that the Corporation has agreed to lease the said land to the Licensee and the Licensee has agreed to have such lease upon the terms and conditions contained herein and subject to Section 118 and other applicable provisions of the Maharashtra Regional and Town Planning Act, 1966 (Maharashtra XXXVII of 1966) and rules and regulations made thereunder including the Navi Mumbai Disposal Of Lands Regulations, 1975 for the time being in force." 5.4.5 From the above it is quite evident that amount shown to be paid as per the agreement is paid towards the plot of land to be leased out to the lessee. This amount is received as consideration for leasing out the plot of land identified in the agreement and is nothing other than that. The consideration against this agreement is received in two parts, namely full premium (specified in the recitals) and the amount specified in para 7 of the agreement. Since both the amount are received as consideration toward the leasing of the said plot, it is in terms ....
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....rvice Tax in respect of such one-time amounts received in respect of lease granted for less than 30 years. We do not find any justification to consider the one-time payment on a different footing when compared to the regular lease rent, received in a periodical manner. We note that on identical set of facts, with reference to lease granted by Tripura Industrial Development Corporation, the Hon'ble High Court of Tripura in the case of Hobbs Brewers India Pvt. Ltd. v. Union of India reported in [2016 (45) S.T.R. 60 (Tripura)] held as below : ............ 16.In view of the legal position as explained above by the Hon'ble Tripura High Court, we find that the appellants are liable to Service Tax on the premium received on leasing of land for the periods of less than 30 years." 5.4.4 Hence in view of the specific provisions as per Section 67 of Finance Act, 1994 and also the decision of the Apex Court in case of Bombay Tyres International, and decision of Tripura High Court in case of Hobb Brewers, we do not find any merits in the submission of the appellants that amount collected as lease premium should not form the part of taxable value.. 5.5 Whether the activit....
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....er of title in the immovable property so leased. What has been considered by the Hon'ble Apex Court in the said decisions is only vis a vis the issue in respect of acquisition of capital assets, for the purpose Income Tax Act, 1961. In case of R K Palshikar [1988 (3) SCC 549] referred to by the learned counsel for appellants the issue for consideration before the Hon'ble Supreme Court was not in respect of transfer of title in immovable property. Hon'ble Apex Court has while approving the decision Patna High Court has observed as follows: "The next question which we have to consider is whether the provisions of Section 12-B of the said Act can be brought into play, although, what was transferred was only lease hold interests in the lands in question. In this connection, it is significant that the leases are for a long period of 99 years and in all the transactions of lease premium has been charged by the assessee for the grant of the lease concerned. In Traders and Miners Ltd. v. Commissioner of Income Tax, Bihar and Orissa, [1955] 27 ITR p. 341 a case decided by a Division Bench of the Patna High Court, the assessee let on lease for 99 years a portion of a Zamindari acqui....
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....sion "transfer of a capital asset" held as under: "We think that the expression "transfer" in the section includes not only a permanent transfer but also a temporary transfer of title to the property in question and lease of mines for any period would fall within the ambit of section 12B of the Act. It was also contended by Mr. Dutt that a transaction of a lease was not tantamount to a transfer of a title but that a mere contractual right was created. We do not think that this argument is correct. A lease of land is transfer of interest in the land and creates a right in rem: and there is a transfer of title in favour of the lessee though the lessor has right of reversion after the period of the lease terminates." This decision has been referred to with approval by this Court in R.K. Palshikar (HUF) v. Commissioner of Income. Tax, M.P. Nagpur, [1988] 3 SCC 549. If transfer of capital asset in section 45 of the Act includes grant of Mining Lease for any period .then obviously the "cost of acquisition" of the land would include the "cost of acquisition" Of the Mining right under the lease. Undisputedly the grant of a lease being a transfer of an asset there is no es....
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....able property within the meaning of Section 53-A, T. P. Act. For the purpose of determining whether there is an agreement to transfer any immoveable property within the meaning of Section 53-A, T. P. Act, we have got to see what is the definition of 'immoveable property.' Immoveable property has been defined in S. S, T. P. Act, in a negative manner. There immoveable property is said not to include standing timber, growing crops or grass. The definition does not say what immoveable property is. For that one has got to go to the definition thereof contained in the General Clauses Act & the General Clauses Act defines "immoveable property" again in an inclusive manner. It says that immoveable property shall include land, benefits to arise out of land & things attached to the earth. Immoveable property is there defined as including not only land but also benefits to arise out of land. That is the immoveable property which can be the subject-matter of transfer, & if there is a contract to transfer immoveable property comprised within this inclusive definition, that would come well within the meaning of Section 53-A, T. P. Act. The benefit to arise out of land is an interest in l....
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....tered as required by law), no right, title or interest in an immovable property can be transferred. 19. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under section 53A of TP Act). According to the TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of the TP Act enacts that sale of immoveable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject matter. xxx xxx xxx 24. We therefore reiterate that immovable property can be legally and lawfully transferred/ conveyed only by a registered deed of conveyance. Transactions of the nature of `GPA sales' or `SA/GPA/will transfers' do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immovable property. The courts will not treat such transactions as completed or concluded transfers or as conve....
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.... 5.6 Whether appellants qualify to be the government authority for the purpose of exemption notification No 25/2012-ST. 5.6.1 Appellants have vehemently argued that they fall within the ambit of governmental authority as they have been created under the provisions of Section 113(3A) of Maharashtra Regional and Town Planning Act, 1966 (MRTP) with 100% government control. 5.6.2 Relevant extracts from the Notification 25/2012-ST, are reproduced below: "In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) and in supersession of notification number 12/2012- Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 210 (E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services leviable thereon under section 66B of the said Act, namely:- 1-38 ....... 39. Services by a governmental authority by way of any activity in relation to any function entrusted to a munici....
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....ng up new machinery for undertaking and completing such work of development, and the comparative speed with which such work can be undertaken and completed in the public interest, if the work is done through the agency of a corporation including a company owned or controlled by the State as a new town, the State Government may, notwithstanding anything contained in sub-section (2), require the work of developing and disposing of land in the area of a new town to be done by any such corporation, company or subsidiary company aforesaid, as an agent of the State Government; and thereupon, such corporation or company shall, in relation to such area, be declared by the State Government, by notification in the Official Gazette, to be the New Town Development Authority for that area. (4) Every Development Authority shall be a body corporate with perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, and contract and sue or be sued by such name as may be specified in the notification under subsection (2). (5) On the constitution of, or on the declaration of any corporation or company as a Development Authori....
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....w settled law by the decision of constitutional bench of Apex Court in case of Dilip Kumar & Co [2018 (361) ELT 577 (SC)] that exemption notifications need to be construed strictly and benefit of any ambiguity in the notification should be interpreted in favour of revenue. The law as stated by the Apex Court in this decision is reproduced below: "52. To sum up, we answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled." 5.6.7 Hon'ble Bombay High Court has in case of Builders Association held as follows: "13. What is heavily relied upon before us is the position of CIDC....
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.... harmoniously in order to understand the nature of the levy, the object and purpose of its imposition. No activity of the nature mentioned in the inclusive provision can thus be left out of the net of the tax. Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered. We cannot then probe into the legislation any further. 15. The reliance placed on the judgment of the Hon'ble Supreme Court in the case of Panbari Tea Co. Ltd. (supra) is entirely misplaced. There, a registered lease deed by the assessee, under which two estates were leased out to a firm for a period of 10 years, was in issue. The lease was executed for a consideration as and by way of premium and annual rent to be paid by the lessee to Panbari. The premium was made payable as noted in the Hon'ble Supreme Court's judgment. What went before the Income Tax Officer is the issue of treatment to the installment paid towards the premium in the relev....
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....gnore that the observations are in the context of the provisions, and the interpretation to be placed thereon, but found in the Income Tax Act, 1961. That is an assessment of the tax on income. We are concerned here with the GST Act and the tax on supply of goods and services. It is not disputed that the position of the CIDCO for the purpose of orderly planning and development will be of no assistance in the sense while developing a new township, the objective of the planning authority is not to earn money, but to develop the area so that the purpose of setting up a township is achieved by more people wanting to live in the area in lieu of the various amenities provided in the area. The CIDCO is one such authority. It is entirely for the legislature, therefore, to exercise the powers conferred by sub-section (2) of Section 7 of the GST Act and issue the requisite notification. Absent that notification, merely going by the status of the CIDCO, we cannot hold that the lease premium would not attract or invite the liability to pay tax in terms of the GST Act. 17. Even the judgment in the case of Shri Ramtanu Cooperative Housing Society Ltd. (supra) is of no assistance. There,....
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.... of the present enactment. Pertinently, the dividing line between governmental and non-governmental, sovereign and regal functions and otherwise is not very thin and post globalization, liberalization and privatization. In that context, a useful reference can be made to a judgment of the Hon'ble Supreme Court in the case of N. Nagendra Rao and Co. v. State of Andhra Pradesh - AIR 1994 SC 2663. The observations in Paras 23 and 24 are extremely relevant. These paragraphs read as under :- "23. In the modem sense the distinction between sovereign or non-sovereign power thus does not exist. It all depends on the nature of power and manner of its exercise. Legislative supremacy under the Constitution arises out of constitutional provisions. The legislature is free to legislate on topics and subjects carved out for it. Similarly, the executive is free to implement and administer the law. A law made by a legislature may be bad or may be ultra vires, but since it is an exercise of legislative power, a person affected by it may challenge its validity but he cannot approach a court of law for negligence in making the law. Nor can the Government in exercise of its executive action be ....
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....f the State even though it was against law and negligent. Needs of the State, duty of its officials and right of the citizens are required to be reconciled so that the rule of law in a Welfare State is not shaken. Even in America where this doctrine of sovereignty found its place either because of the "financial instability of the infant American States rather than to the stability of the doctrine's theoretical foundation", or because of "logical and practical ground", or that "there could be no legal right as against the State which made the law" gradually gave way to the movement from, "State irresponsibility to State responsibility". In Welfare State, functions of the State are not only defence of the country or administration of justice or maintaining law and order but it extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. The demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which a....
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....perty of the state government. Hence the claim of protection under Article 289(1) of the Constitution in respect of the consideration received for provision of taxable service cannot be sustained. This issue was considered in respect of indirect taxes such as Custom and Excise duties, by a nine member bench of Apex Court on presidential reference and court held as follows (as reported at [1963 AIR 1760]) "The main question, on this reference by the President of India under Art. 143 (1) of 792 the Constitution, depends upon the true scope and interpretation of Art. 289 of the Constitution relating to the immunity of States from Union taxation. On receipt of the reference notices were issued to the Attorney General 'of India and to the Advocates General of the States. In pursuance of that the case of the Union Government has been placed before us by the learned Solicitor-General and that of the States of Andhra Pradesh, Assam, Bihar, Gujarat, Kerala, Madhya Pradesh, Madras, Maharashtra, Mysore, Orissa, Punjab and West Bengal was presented to us by their respective counsel. On the date the hearing of this case started, an application was made on behalf of the State of Uttar P....
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....nt of a State, irrespective of whether such goods are used or not for the purposes set out in the said sub-section (IA) as at present in force; And whereas it is proposed to introduce in Parliament a Bill, the draft of 'which is annexed here to and marked "Annexure', to amend for the purpose aforesaid subsection (2) of section 20 of the Sea Customs Act, 1878 (Act 8 of 1878) and sub-section -(IA) of section 3 of the Central Excises and Salt Act, 1944 (Act 1 of 1944); And whereas Governments of certain States have expressed, the view that the amendments as proposed in the said draft of the Bill may not be constitutionally valid as the provisions of article 289 read with the definitions of 'taxation' and -tax' in clause (28) of article 366 of the Constitution of India preclude the Union from imposing or authorising the imposition of any tax, including customs duties and excise duties; or in relation to any property of a State except to the extent permitted by clause (2) read with clause (3) of the said article 289; And whereas the Government of India is on the other hand inclined to the view (i) that the exemption from Union taxation granted by clau....
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....tion 3 of the Central Excises and Salt Act, 1944 (Act 1 of 1944) as amended by the Bill set out in the Annexure be inconsistent with the provisions of article 289 of the Constitution of India New Delhi Dated the 19-4-1962 sd/- Rajendra Prasad, President of India. 35. But it is contended on behalf of the States that in the scheme of our Constitution no distinction has been made between direct and indirect tax and therefore this distinction is not relevant to the present controversy. It is true that no such express distinction has been made under our Constitution; even so taxes in the shape of duties of customs (including export duties) and excise, particularly with a view to regulating trade and commerce in so far as such matters are within the competence of Parliament and are covered by various entries in List I to which reference has already been made, cannot be called taxes on property; they are imposts with reference to the movement of property by way or import or export or with reference to production or manufacture of goods. Therefore even though our Constitution does not make a clear distinction between direct and indirect taxes, there is n....
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....r to the three questions referred to us must therefore, be in the negative. Let the opinion of this Court be reported to the President accordingly. By Court: In view of the opinion of the majority the answer to the three questions referred to is in the negative. Questions answered accordingly." In view of the decision of Hon'ble Apex Court referred above we do not find any merits in the submissions made by the Appellants in this respect. 5.6.9 The appellants have contended that the allotment of plots by them as an agent of State of Maharashtra is a statutory function qua the land owned by the government which could be performed only by the state and therefore is not a service. Thus in view of the Circular 89/7/2006-ST dated 18.12.2006 no service tax could have been levied upon them. They also rely upon the decision of Tribunal in case of Maharashtra Industrial Development Corporation [2014 (36) STR 1291 9T-Mum)]. The decision rendered in case of Maharashtra Industrial Development Corporation (MIDC) is clearly distinguishable as MIDC is statutorily constituted under the Maharashtra Industrial Development Act, 1962. Section 3 of this Act reads as follows....
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.... the service rendered is a taxable service as defined in Section 65 ibid, there is no inherent exemption from levy of service tax merely on the ground that the service provider is "Government" or "Government Agency", nor is there any exemption from the levy of service tax merely because service recipient is Govt. or Govt. agency. If such services are exempted under an exemption Notification issued under Section 93 ibid, that is a separate issue. The appellant cited CESTAT judgment in the case of Maharashtra Industrial Development Corporation (MIDC) v. CCE, Nasik [2014-TIOL-2022-CESTAT-MUM = 2014 (36) S.T.R. 1291 (Tri.)] and [2015-TIOL-CESTAT-Mumbai] in its support, wherein CESTAT in effect held that based on MID Act, 1961 of Maharashtra Government, the activities undertaken by MIDC are in the nature of mandatory and statutory functions and relied upon the C.B.E. & C. Circular No. 89/7/2006, dated 18-12-2006 to decide in favour of the assessee. While C.B.E. & C. clarifications are not binding precedents for CESTAT, even so, we reproduce the said C.B.E. & C. circular below :- "Circular No. 89/7/2006-S.T., dated 18-12-2006 F. No. 255/1/2006-CX.4 Government of India Ministr....
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....ity undertaken falls within the ambit of a taxable service. 4. Trade and field formations may be advised accordingly. 5. Hindi version will follow. It is clear that even as per the above C.B.E. & C. circular dated 18-12-2006, service tax was not to be charged on activities performed by sovereign or public authorities under provisions of law in the nature of statutory obligation when the fee collected for such activities is in the nature of compulsory/statutory levy and is deposited into Govt. treasury. In the present case, the appellant is a corporate entity and is therefore can scarcely be called sovereign or public authority and also indisputably the charges collected by it were not deposited in the Govt. treasury. Therefore, even the said C.B.E. & C. circular (non-binding as it is on CESTAT) does not come to the appellant's rescue. Here, it is pertinent to mention that vide Exemption Notification No. 23/2016, dated 13-4- 2016, the Govt. has inter alia exempted services rendered by Govt. or local authorities to other Govt. or local authorities and services rendered by Govt. or local authority by way of issuance of passport, driving licence, birth/death ....
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....ng the period upto five years, "by reason of - (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax". 46. Thus, each of the sub-clauses getting covered by (a) to (e) of Section 73(1) are independent of each other and existence of any/each one of the individual situation is good enough to attract demand of Service Tax for extended period under the proviso clause to Section 73(1). In the present case, the Noticee have suppressed the material facts regarding the provision of 'Renting of Immovable Property Services' by way of leasing of commercial plots together with building/premises. The Noticee are holding Service Tax Registration right since 2003-04 for other services. Thus, the Noticee was familiar with the provisions of the Service Tax law and the procedures thereof. Admittedly, the Noticee were discharging Service Tax on services like 'Technical Inspection and Certification services', 'Mandap Keeper's services', 'Membership of Club or Association services' ....
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....icular person or a group of persons. It is also contended that being a Government company, the intent to evade payment of Service Tax is absent and, therefore, the extended period of limitation cannot be invoked. In this regard, I find that the Special Bench of Hon'ble Tribunal, New Delhi, in the case of Hindustan Aeronautics Ltd. vs. Collector of Customs, reported in 1984 (16) ELT 544 (T), had held that Public Sector undertakings/companies which are incorporated under the Companies Act are separate entities and cannot be considered as Government. Further, the Hon'ble Tribunal in the case of Housing & Development Corporation Ltd. (HUDCO) vs. C.S.T., Ahmedabad - 2012 (26) STR 531 (T), had upheld the invocation of extended period due to suppression of facts. Para 20 of the aforesaid judgment reads as under - "20. It was submitted on behalf of the appellant that the appellant is wholly owned Government Company and therefore there cannot be mala fide intention on their part to evade payment of Service Tax. Revenue relied upon the decision of the Tribunal in the case of Bharat Petro Corporation Ltd. v. CCE, Nasik 2009 (242) E.L.T. 358 (Tri.- Mum.), wherein the Tribunal upheld t....
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....m regarding dutiability of items manufactured by it." Therefore, we find ourselves in agreement with the submissions that the appellant could not have interpreted the law according to their understanding without taking sufficient care for their interpretation, is correct. In the absence of any evidence to show that the appellant had intimated the Department or had obtained legal opinion, invocation of extended period on the ground of suppression of facts has to be upheld." 50. There is nothing on record that the Noticee had even remotely made any enquiries with the Department or had sought any legal opinion vis-a-vis the taxability of the services provided, viz. leasing of commercial plots along with the building/premises, though the levy of Service Taxon 'Renting of Immovable Property services' had been introduced since 01.06.2007. It is relevant to note that when the levy of Service Tax on the impugned service was introduced the Noticee was already holding he Service Tax Registration for other services and were discharging the Service Tax liability and hence the question of treating the impugned service differently does not arise. As such, the only possible view here is ....
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.... the submission of the Noticee. 53. The reliance placed on the case laws in Rolex Logistics, Zandu Pharmaceuticals, HMM Ltd. and Karvy Consultants (supra) is also not relevant, as the Noticee had never declared their activity of providing 'Renting of Immovable Property service' in any manner to the department, not even in their ST-3 Returns. Therefore, gaining knowledge of the said activity is out of question. It was only after DGCEI initiated the investigations against the Noticee that they submitted the relevant documents. Nevertheless, the Hon'ble Gujarat High Court in the case of CCE vs. Neminath Fabrics Pvt. Ltd. - 2010 (256) ELT 369 (Guj), had held that proviso to Section 11A(i) of Central Excise Act, 1944 provides for a situation whereunder provisions of sub-section (i) ibid recast by legislature extending period within which SCN issued. The proviso cannot be read to mean that because there is knowledge, suppression which stands established disappears. Concept of knowledge, by no stretch of imagination, can be read into the provisions. Suppression not obliterated, merely because Department acquired knowledge of irregularities. What has been prescribed under the stat....
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....or as per section 73 of the Finance Act, 1994. 5.8 Whether appellants are liable to pay interest on the service tax short paid/ not paid by them by the due date. 5.8.1 Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. In case of P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)] Hon'ble Bombay High Court has stated as follows: "10.So far as interest u/s. 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the Official Gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable u....
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....ection are present. The ingredients specified for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 ibid. Since in respect of show cause notice dated 31.03.2012, we hold that demand could have been made by invoking the extended period of limitation as provided by Section 73, we uphold the penalties imposed under Section 78 of The Finance Act, 1994. Hon'ble Supreme Court has in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] held as follows: "23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides." 5.9.3 In view of various decisions of High Court/ Tribunal holding that penalty under Section 76 and 78 can be imposed simultaneously till the amendment of Section 78, ....
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....element of mensrea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023 : "A penalty impos....
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.... invocation of the said Section also. In any event we are not satisfied that an assessee who is guilty of suppression deserves such sympathy. As such, we are of opinion that the learned Single Judge was not correct in directing the 1st appellant to modify the demand withdrawing penalty under S. 76. Therefore, the judgment of the learned Single Judge, to the extent it directs the first appellant to modify Ext. P1 by withdrawing penalty levied under S. 76, is liable to be set aside and we do so. The cumulative result of the above findings would be that the Writ Petitions are liable to be dismissed and we do so. However, we do not make any order as to costs." Same view was again expressed by Kerala High Court in case of Lawson Travel and Tours (I)(P) Ltd [2015 (37) ELT 183 (Ker)] as follows: "5. What we notice is, the liability to pay Service Tax is in accordance with the Finance Act, 1994, as the taxable services involved in the matter was for the period from April, 2000 to March, 2004. The decision of this High Court referred above in Krishna Poduval's case (supra) was also prior to Finance Act, 2008, which made a remarkable distinction between Sections 76 and 78 of Serv....
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....llants have given certain details in respect of the amounts received from M/s PVP Ventures P Ltd and M/s Metropolis Hotels. Since these details have been made available only at the stage of arguments of the appeal we are not having any views in this respect from the revenue. 5.10.2 Hence in respect of these claims we have no option but to remand the matter back to adjudicating authority to consider these claims made by the appellant on merits. 5.11.1 Moreover by Finance Act, 2017, a new Section 104 in the Finance Act dated 31.3.2017 has been introduced, which reads as follows:- "104. Special provision for exemption in certain cases relating to long-term lease of industrial plots. Notwithstanding anything contained in section 66, as it stood prior to the 1st day of July, 2012, or in section 66B, no service tax, leviable on one time upfront amount (premium, salami, cost, price, development charge or by whatever name called) in respect of taxable service provided or agreed to be provided by a State Government industrial development corporation or undertaking to industrial units by way of grant of long-term lease of thirty years or more of industrial plots, shal....
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.... Appellants. Yes Whether the lease premium recovered from the lessee against agreement to lease entered into by appellants is subjected to service tax under the taxable category of Renting of Immovable Property Yes, to be considered with Section 104 of Finance Act, 1994 Whether the activities undertaken by the appellant qualify to be service as defined by Section 65B(44) of Finance Act, 1994 with effect from 1st July 2012 Yes Whether the extended period of limitation can be invoked in the facts and circumstances of this case for making the demand of service. Yes Whether appellants are liable to pay interest on the service tax short paid/ not paid by them by the due date. Yes Whether penalties under Section 76, 77 and 78 are imposable on the appellants Yes Levy of Service Tax on the plots leased and intended for residential use and for hotels. Matter remanded 6.1 In view of discussions as above we uphold the impugned orders and dismiss the appeals (ST/89766/13, ST/86197/15, ST/87442/15 filed by the appellant on all counts except for re-quantification of the demands after considering the claim of the appellants in respect plot of land intende....
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....ation. 8.1 Therefore, on land related matters which are stated to be within the territorial boundaries of federal units are excluded from the purview of taxation by the Central Government except where indirect tax is imposable as per provision contemplated in Section 289 of the Constitution of India, as has been held in the presidential reference noted by my learned brother. Service Tax being in the nature of indirect tax, though was not in existence at the time when presidential reference was answered by the Hon'ble Supreme Court, has been stretched into the purview of Article 289 for which duty demand is held to be justified since appellant acted on behalf of the State Government in "renting the immovable property". 9. At this juncture, I would like refer to Article 274 of the Constitution of India which reads as here under:- "274. (1) No Bill or amendment which imposes or varies any tax or duty in which States are interested, or which varies the meaning of the expression "agricultural income" as defined for the purposes of the enactments relating to Indian income-tax, or which affects the principles on which under any of the foregoing provisions of this Chapte....
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....rought into the Service Tax purview, which became effective from 01.07.2010. 11. It would be not out of place to mention that Transfer of Property Act deals with transfer of "right" and "interest" over the property which can be effected through several means like sale, mortgage, lease, gift, exchange and the like and going by its text, the word "title" over the property is absent in all these modes of transfer as given in the transfer of Property Act, on which several decisions are relied upon to justify that lease does not transfer immovable property to any other person, contrary to the provision of Transfer of Property Act such transfer, sometimes "right" and always "interest" over the property is being transferred. In the appeal before us, such lease was granted for 60 years that would amount to permanent transfer since going by the Indian Limitation Act dealing with recovery of possession of immovable property contemplated in Section 65, 66 & 67 read with schedule and Annexures to the said act, even a Govt. cannot sue another person for recovery of possession over immovable property after laps of 30 years. 12. We have heard arguments on status of appellant as to if it can....