AI Drafter 
TaxTMI 
TaxTMI 
2024 (12) TMI 1609
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....016 and on the basis of the observations made 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 d....
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....ting the Building Plan sanctioned by the Bhubaneswar Development Authority the appellant commenced construction of Multi Storey Commercial Cum Multiplex and Office Buildings called '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 perm....
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....lease rent. The appellant submits that the difference between the Premium or Salami and the lease rent as envisaged in Section 105 of the Transfer of Property Act, 1882, has been dealt in the decision of the Hon'ble High Court in the case of A.R. Krishnamurthy and 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....
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....e of the land value, which is not being disputed by the Revenue. The appellant has taken the CENVAT Credit only on Service Tax paid by them for 'input services' utilized by them. They have not taken any CENVAT Credit on inputs. Thus, both the conditions specified in the Notification has been fulfilled by the appellants. Therefore, the Adjudicating authority is 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 ser....
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....e Service'. ▪ Renting of Immovable Property Service: 9. On going through the documentary evidence placed by the appellant, the following facts emerge : (1) The appellant has entered into a Lease Agreement with the Govt of Odisha on 01.03.1982 obtaining the leasehold for a period of 90 years. By way of further lease deeds, they have obtained additional land for construction of Multi Storey Commercial 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 considera....
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....y owned by some other person. It is an outcome of the separation of ownership and possession. The lessor of the land is the who owned and possessed it, but has transferred the possession of it to another. The price paid for the transfer of possession or the right to enjoy the property is called the premium under section 105 of the Transfer of Property Act. The periodical payments made for the continuous enjoyment of the benefits under the lease are called 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....
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....ly well-versed in the working of tea estates. They must be assumed to have known the difference between the two expressions "premium" and "rent"; and they had designedly used those two expressions to connote two different payments. The annual rent fixed was a considerable sum of Rs. 54,000 and the premium, when spread over 10 years, would work out to Rs. 22,500 a year. There is no reason, therefore, to assume that the parties camouflaged their real intention 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.....
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.... classification of 'Renting of Immovable property', the Tribunal has held that amount received in lumpsum on one time basis on account of long term lease would not require any Service Tax payment. 10.5. We also observe that the appellant has placed reliance on the decision of the CESTAT at Kolkata in the case of Bengal Silver Spring Projects Ltd. Vs. Principal Commissioner of Service Tax - I vide Final Order No. 77501 of 2024 dated 14.11.2024 in Service Tax Appeal No. 76203 of 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....
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....ordingly, we hold that the premium or salami paid to the Appellant for transfer of interest in the property, is not exigible to the service tax as held by the Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida. 6.4. In this case, we observe that the appellant has only received the one time premium as the consideration. There was no periodical rent payment. Accordingly, we hold that the permanent transfer of lease hold right by appellant to 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 ....
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.... Property Service is rendered, the assessee would be eligible to take the CENVAT Credit. The CENVAT credit would thus be eligible not only for the input services, but also for the inputs and capital goods in such cases. 12.3. It would be useful to go through the case law of D L F Promenade Ltd. vs Commissioner, Service Tax-Delhi vide Final Order No. 50293 of 2023 dated 29 January, 2020 [ Service Tax Appeal No. 54213 of 2014], wherein it has been held as under:- "17. The Madras High Court in Dymos India Automotive examined 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, constr....
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....oods service used for construction of the Mall, which was ultimately let out could not have been denied to the appellant. The findings to the contrary recorded by the Commissioner cannot be sustained and are, accordingly, set aside." 13. In the present case, the Department has taken a stand that the appellant is rendering the service of 'Renting of Immovable Property'. As per the cited decisions of High Courts and the Tribunal, the appellant would not only be eligible for the CENVAT Credit of Inputs Services, but also for the CENVAT Credit in respect of the inputs. In such a case, 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 sam....