TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 1609
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....e by the audit, the Show Cause Notice was issued for the period 2013-14 to 2015-16 on 20.04.2018. For the subsequent period 2016-17 three more Show Cause Notices were issued. The details are as per the following Table : SL No SCN NO. & Date Period Demand of Service Tax on Renting of Immovable Property (in Rs. ) Demand of Service Tax on Security/Legal Service (in Rs. ) Disallow of the inadmissible input service credit (in Rs. ) Total (in Rs. ) 1 V(01)481/Audit/S T/Gr.1/BBSR/2016 3966-70A, Dt 20- 04-2018 2013-14 to 2015-16 7,63,20,798 86,892 4,29,01,489 11,93,09,179 2 V(01)98/Audit/ST/ Gr.1/BBSR/2017/1 634-38A, Dt. 29-01-2019 2016-17 0 0 12,76,264 12,76,264 3 V(01)98/Audit/ST/ Gr.1/BBSR/2017/5 382-86A, Dt. 26-03-2019 2016-17 0 0 13,69,86,654 13,69,86,654 4 V(01)98/Audit/ST/ Gr.1/BBSR/2017/5 387-91A, Dt. 26-03-2019 2016-17 3,95,12,109 0 0 3,95,12,109 TOTAL 11,58,32,907 86,892 18,11,64,407 29,70,84,206 3. The Adjudicating authority took up all the four Show Cause Notices for disposal together and confirmed the demands. Being aggrieved, the appellant is before the Tribunal. 4. The Ld. Counsel appearing on b....
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....d 'Esplaned-One'. (iii) During the period 2013-14 to 2016-17, the appellant executed agreement (Sub-Lease Agreement) for permanent assignment of the commercial space (Shops, Offices etc.) including leasehold rights to the intended buyers. (iv) The appellant took Service Tax Registration under the category of "Commercial or Industrial Construction Service" and discharged Service Tax on the amount received towards purchase of the Commercial space/office from the intended buyers. (v) The appellant discharged Service Tax after taking abatement benefit under Notification No. 26/2012-ST, dated 20-06-2012 i.e. the appellant has discharged the Service Tax on 30% of the amount received. The appellant states that they have taken CENVAT Credit of input services used for providing the aforesaid output service i.e. CICS. (vi) Once the appellant executed the registered Deed of Assignment (sub-lease) in favour of the purchaser, the right, title and interest of the property is permanently transferred, therefore, the transaction must be treated as 'sale of the immovable property', within the meaning of Section 54 of the Transfer of Property of Act, 1882, which read as follows: " 'Sal....
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....d A.R. Rajagopalan v. Commissioner of Income Tax, Madras, (1982) 133 ITR 922 (Mad.). (xiv) From this decision, it gets clarified that the price paid for transfer of possession or the right to enjoy the property is called the 'Premium or Salami' and the periodical payments made for continuous use of the property under lease is called 'rent'. The Appellant has received only a one-time payment as Premium and hence the Premium received by the Appellant cannot be called as 'rent'. (xv) The difference between the 'Premium' and 'Rent' has been highlighted in the Judgment of the Hon'ble supreme Court in the case of Commissioner of Income Tax v. The Panbari Tea Co. Ltd., (1965) 57 ITR 422 (SC). Reliance is placed on this case law. (xvi) The appellant relies on the decision of the Hon'ble Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida - 2015 (38) S.T.R. 1062 (Tribunal), wherein it has been held that the 'Salami or Premium' received in respect of lease of immovable property is not exigible to service tax. (xvii) The appellant also placed reliance in the decision of the Kolkata CESTAT in the case of Bengal....
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....s in error in holding that the appellant is not eligible for the CENVAT credit. Accordingly the confirmed demand of Rs. 18,11,64,407 is required to be set aside on merits. (xxii) The Show Cause Notice issued on 20.04.2018 for the period 2012-13 to 2015-16 is hit by time bar, for the following reasons : (a) The appellant has treated the service as that of CICS and was paying the Service Tax. Such Service Tax payments and the ST 3 Returns filed by them were being received by the Dept. and no queries were raised. This being so, the question of suppression with an intent to evade payment of Service Tax cannot be made out against the appellant. (b) The appellant has documentary evidence, including the details of Stamp Duty paid on the transaction value on the Sub-Lease deed, to the effect that the service rendered is that of CICS and not Renting of Immovable property. Their belief is backed by the cited case laws. Hence, it is a question of Bonafide belief on the part of the appellant that the service rendered is not liable for Service Tax under the category of 'Renting of Immovable Property Service'. (c) All the transactions towards receipt of amounts and payment of Servic....
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....cial Cum Multiplex and Office Buildings. After getting the Building Plan sanctioned by the Bhubaneswar Development Authority, the appellants have carried out the construction activity and executed Sub-Lease Agreement for permanent assignment of the commercial space (Shops, Offices etc.) including leasehold rights to the intended buyers. (2) From the various documents like Application for purchase of the office space, Allotment Letter, Agreement for Sub-Lease and registered Indenture of Assignment (Sub-lease) and clauses contained therein, it is seen that the appellant has transferred the constructed office space with all rights, title and interest which is treated sale of immovable property under Section 54 of the Transfer of Property Act, 1882. On the consideration received, the requisite Stamp Duty is paid. Occupancy certificate is being issued, once the construction is complete in all respect and the unit is fit for operation as a commercial premise. (3) Sample copy of the Lease Agreement, [relevant portion], Stamp Duty Payment and Occupancy Certificate are reproduced below: 10. Section 54 of the Transfer of Property of Act, 1882, reads as under : " 'Sale' is a transfer o....
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....led rents or royalties." 10.2.2. As per this judgment, in case of Renting or Leasing, the Lessee makes periodical payments for the continuous enjoyment of the benefits under the lease. When such payments are not made on periodical basis, the amount paid cannot be equated to 'Rent'. 10.3. The Hon'ble Apex court in the case of Commissioner of Income Tax v. The Panbari Tea Co. Ltd. [(1965) 57 ITR 422 (S.C.)], had the occasion to differentiate between the 'Premium' and 'Rent'. The relevant portion of this decision is extracted below : - "Under section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. The section, therefore, bring....
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.... and fixed a part of the rent in the shape of premium. The mere fact that the premium was made payable in instalments cannot obviously be decisive of the question, for that might have been to accommodate the lessee." 10.3.1. This judgement clarifies that while the Premium or Salami is a one-time payment, the 'rent' is payable at regular intervals. It also recognizes that in trade and commerce practice of payments on account of premium and rent exists. 10.4. The issue as to whether the Service Tax is payable on 'One time premium' in case of long term leasing, was before the Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida [(2015 (38) S.T.R. 1062 (Tribunal)]. The relevant extracts are reproduced below : - "10. Whether the Service Tax is chargeable only on the lease rent or also on one time premium amount charged in respect of long term leases? 10.1 A lease is a transaction, which has to be supported by consideration. The consideration may be either premium or rent or both. The consideration which is paid periodically is called rent. As regards premium, the Apex Court in the case of Commissioner of....
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....f 2016, wherein it has been held as under : - "2. Brief facts of the case are that the appellant had entered into an agreement with Kolkata Municipal Corporation (KMC in short) to develop and maintain 8-acres of land. As per the lease agreement with KMC, appellant is entitled to all the construction / erection / structure of any nature whatsoever as the absolute owner thereof and to enter into agreement for transfer of its leasehold rights together with the constructed areas belonging to it. Accordingly, the appellant sub-leased the properties to various parties. In respect of the land to be mutated by the sub-lessee in their name, the sub-lessee is deemed to be the lessee of the said plot and has to apply to KMC for renewal of lease after expiry of the 99 years lease period. After mutation, the full rights and title goes in favour of the sub-lessee, subject to renewal of the original deed after its expiry. Therefore, the appellant treated the said transaction as 'sale of leasehold rights' and not paid service tax on the outright transfer of lease hold rights. However, the department considered the transaction of long term lease undertaken by the appellant as a taxable service li....
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....various parties would not be liable to Service Tax." 11. When the factual matrix of the present Appeal is applied to the cited decisions, particularly that of this Tribunal in the cases of Bengal Silver Spring Projects Ltd. (cited supra) and Greater Noida Industrial Development Authority (cited supra), we find that these case laws are squarely applicable to the facts of the present case. 11.1. Accordingly, we hold that the appellant has not rendered any service under the category of 'Renting of Immovable property'. Therefore, the confirmed demand of Rs. 11,58,32,907/-, is legally not sustainable and we set aside the same and allow the Appeal filed by the appellant on merits to this extent. ▪ Disallowance of input service credit: 12. Coming to the issue of the Construction of Industrial Complex Service rendered by the appellants, we observe that the appellant have undertaken full construction of the complex and have sold the individual units [On long term sub-lease] to the buyers. They have paid the Service Tax on the service portion, by claiming the abatement benefit in terms of Sl. No. 12 of Notification No. 26/2012-S.T. dated 20.06.2012. The Department ....
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.... whether CENVAT Credit on "commercial or industrial construction‟ service can be utilized for payment of service tax on "renting of immovable property‟ and observed as follows:- "10. The Tribunal also referred to the decision in the case of CCE, Coimbatore Vs. Lakshmi Technology & Engineering Indus Ltd. [reported in (2011) 23 STR 265 (Tri.-Chennai)] and also the decision in the case of Navaratna S.G. Highway Property Private Limited Vs. CST [reported in (2012) 28 STR 166 (Tri.-Ahmd.)] and held that without construction of the building, the renting of immovable property services cannot be provided and that therefore, construction service is an eligible service for credit for providing output service of renting of immovable property. 11. In our considered view, the conclusion of the Tribunal is well founded, as construction service is an eligible service for credit for providing output service of renting of immovable property and without construction of the building, the renting of immovable property cannot be provided. We are also of the opinion that there is no error in the decision taken by the Tribunal." 18. The aforesaid decision of the Madras High Court mak....
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....ase, the entire confirmed demand of Rs. 11,58,32,907/- as Service Tax on Renting of Immovable Property Service, would get fully off-set by the CENVAT Credit of Rs. 18,11,64,407/- taken by the appellant. Thus, the contrary stand taken by the Revenue is fatal to their case. Therefore, we hold that even on this count, the confirmed demands of Rs. 18,11,64,407/- and Rs. 11,58,32,907/- are legally not sustainable and hence we set them aside on merits. ▪ Time bar: 14. Coming to the arguments on account of time bar as canvassed by the appellant, we find considerable force in the same. Undeniably, the appellant is Registered with the Department. They have treated their service as that of Construction of Industrial Complex Service (CICS) and were paying Service Tax under this category. They have also been filing their ST-3 Returns. The Department had no qualms in accepting the Service Tax payments and the ST-3 Returns filed. No queries have been raised about the CENVAT being taken and Service Tax being paid. All the details required for the quantification of demand have been gathered from the books of accounts of the appellant. Hence, we find that the Department....