TaxTMI 
TaxTMI 
2025 (10) TMI 265
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....the above consideration amount. The department therefore, issued a show cause notice dated 26.03.2019 to the appellant proposing recovery of service tax of Rs. 94,41,600/- under Section 73(1) along with interest under Section 75 and penalty under Section 77 and 78 of the Finance Act, 1994. 1.1 The show cause notice was decided vide order dated 25.05.2019 wherein the adjudicating authority confirmed above service amount upon the appellant under proviso to Section 73 along with interest and imposed a penalty of Rs. 10,000/- under Section 77 and penalty equal to service tax amount under Section 78 of the Finance Act, 1994. Aggrieved with the above order, the appellant filed appeal before the learned Commissioner (Appeals) who vide impugned order dated 30th August, 2019 upheld the order of the lower authority and rejected their appeal. Hence, this appeal. 2. In appeal, the appellant took the following grounds:- a) W.e.f. 01.07.2012, the term 'service' is defined under Section 65 B(44) of the Finance Act,1994 as under: - "service" means any activity carried out by a person for another for consideration, and y1 includes a declared service, but shall not include- ....
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.... title of the property as they are not the owner of the property. g) Demand cannot be confirmed on the basis of non-submission of documentary evidence to prove transfer of property. Payment of stamp duty cannot be treated as the sole criteria for determining the nature of transaction as transfer of title in immovable property. h) Learned Appellate authority relied on the Advance Ruling in the case of Zaver Shankarlal Bhanushali- 2018 (14) GSTL 429 (A.A.R.-GST) to hold that the amount is taxable. This ratio cannot be applied in their case as judgment rendered by Advance Ruling Authority cannot be treated as binding precedent. They rely on the following cases:- • Lloyd Electric & Engineering Ltd. 2018 (361) E.L.T 1043 (Tri - All.) • Laxmi Electricals & Decorators. 2016 (41) S.T.R. 132 (Tri. - Del.) i) The SCN is not maintainable as demand is without jurisdiction. The CERA has conducted audit of their factory in Daman whereas the concerned building in which their registered office is located, is in Mumbai. The Service Tax has been demanded by Daman Commissionerate without having it's jurisdiction. They rely on the decision of this Tribunal in the cas....
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.... rely on the following cases:- • Cosmic Dye Chemical Vs. Collector of Central Excise, Bombay 1995 (75) ELT 721 (SC). • CCE Vs. Chemphar Drug and Liniments 1989(40) ELT 276 (SC), • Pushpam Pharmaceuticals company VS. CCE, Bombay 1995 (78) ELT 401 (SC) m) No mala fide intent in non-payment of service tax as they were under a bona fide belief. They rely on the following cases:- • Stone & Webster International Inc. V/s CCEx., Vadodara. 2011 (22) S.T.R. 467 (Tri. Ahmd.) • Aditya Birla Nuvo Ltd. V/s CCEx., Vadodara. 2011 (22) S.T.R. 41 (Tri. Ahmd.) • CCEX V/s Steel Cast Ltd. 2011 (21) S.T.R. 500 (Guj.) • Khurana Engineering Ltd. V/s CCEx. Ahd 2011 (21) S.T.R. 115 (Tri.-Ahmd) n) SCN does not point out any mala fide conduct of the appellant and therefore, impugned order has gone beyond the scope of SCN in imposing the penalty. As the transactions have been disclosed in the appellant's books of accounts, no malafide conduct can be alleged for non-payment of service tax. They rely on the decision in the case of Kirloskar Oil Engines Ltd. 2004 (178) ELT 998 (Tri.-Mumbai) and Steelcast Ltd. - 2009 ....
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.... as provided under section 9 of the GST Act." He argued that ratio of this decision is equally applicable in this case as definition of "Service" in both Pre GST as well as post GST period are similarly worded. 3.2 Learned Counsel also highlighted the decision of Cestat Kolkata in the case of M/s Bhakar Steel and Ferro Alloys Pvt Ltd, Shri Nikunj Beriwal, Director reported at 2022(8) TMI 989-Cestat Kolkata which is squarely applicable in their case wherein issue was demand of service tax on compensation amount received for transferring tenancy rights in favour of another person. The Tribunal held that the appellants were not required to pay service tax on the amounts received by them in the above enumerated cases. It also found that the whole case is based on the balance sheet of the appellant and therefore, extended period is not invokable. Various Courts have consistently held that the extended time limit can be invoked only if there is a positive act on the part of an assessee to conceal anything from the department. He therefore argued that the demand of service tax is neither sustainable on merits nor on jurisdiction. Extended period is also not invokable in this case. Henc....
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....signed by them in favour of Sumer Buildcorp Pvt Ltd. in lieu of consideration of Rs. 6,29,44,000/- is located at Mumbai. Their registered office is located in that building on rental basis whereas factory is located at Daman. If at all, any service tax arises on such assignment of tenancy right, the show cause notice should have been issued by the jurisdiction Commissionerate in Mumbai and not by Daman Commissionerate. Relying on the decision in the case of M/s Vihar Aahar Pvt. Ltd- 2013 (32) STR 563 (Tri.-Ahmd.), Unitech Machines Ltd.- 2018(9) GSTL 401 (Tri.-All.), Helios Food Additives Pvt. Ltd. 2011(24) STR 721(Tri.-Mumbai), Ores India Pvt Ltd.-2008 (9) STR 157 (Tri.-Kolkata), he pleaded to set aside the show cause notice itself which is issued without jurisdiction. We find that this aspect has been discussed by the Appellate authority, wherein he has justified issuance of show cause notice by Daman Commissionerate. Learned Counsel was asked to submit whether their registered office was involved in any separate business activity other than the manufacturing in their factory and whether their factory was availing input service credit of service tax paid on rented premises or any ....
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....ant that relinquishment of tenancy right is in relation to immovable property and therefore, by virtue of exclusion clause in the definition of service as provided under Section 65B(44) of the Finance Act, 1994, such an amount is not liable to any service tax. As per Section 65B(44) of the Finance Act, 1994: "(44) "Service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) An activity which constitutes merely, - (i) A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) ........................................................................ (iii) ........................................................................" The learned Counsel also relied on various case laws as cited supra in support of their case. 5.3 We find that Hon'ble Allahabad High Court in the case of Kanhiya Lal and Ors. 1964 (8) TMI 96 has delved into the concept of Tenancy rights in immovable property, emphasising that the right of enjoyment derived from a building, such as tenancy right, constitutes immovable property. This j....
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....s or implied, or in perpetuity, in consideration of a price paid or promised or of money, 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." Lease is the transfer of a right to enjoy the immovable property and what has been transferred is the right of enjoyment. Consequently, in cases of lease or tenancy, immovable property in dispute is the right of enjoyment of the property. As this is a benefit arising out of the building, the tenancy right is (in ?) an immovable property shall also be in (an?) immovable property." 5.4 We also find that Hon'ble Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry & Ors., M/s. Multi Thread Fasteners, M/s. Imperial Engineers, Lucid Colloids Ltd., M/s. Metal Plat Engineers- 2025(1) TMI 516, discussed leviability of GST on transfer of lease rights. The provision of Section 65B(44) of Finance Act, 1994 defining "Service" have also been discussed in detail. After, considering several other decisions, Hon'ble High Court concluded that assignment by sale and transfer of leasehold rights of the plot of l....
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....il rate of tax as per the aforesaid notification. Therefore, when the industrial unit is allotted land by the GIDC, no GST is required to be paid under the provisions of GST Act as per entry no. 41 of Notification No. 12/2017. 37. As per the lease deed executed by GIDC in favour of industrial unit for allotment of plot of land, the industrial unit is entitled to transfer such leasehold land in favour of any third party with the prior permission of the GIDC on payment of transfer charges as prescribed by GIDC. However, such transfer fee would be subject to levy of GST at the rate of 18% under the GST Act as it would amount to supply of services by GIDC giving permission to transfer the leasehold rights by the industrial unit in favour of a third party who will become the lessee-assignee in place of the original allottee-assignor of the plot by the GIDC. Deed of assignment of leasehold rights which is executed by the lessee-assignor in favour of the third party is also subjected to levy of stamp duty under the provisions Gujarat Stamp Act, 1958 as well as it is compulsorily required to be registered under the provisions of the Registration Act, 1908. 39. Immovable p....
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....mbinations, constitute property and law determines only which sticks are in bundle of a person. 42. In the above context, it would be germane to refer to section 54 of the Transfer of Property Act, 1882 which defines "sale" as transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. It further defines "sale how made" as transfer in the case of tangible immovable property of the value of one hundred rupees and upwards or in the case of a reversion or other intangible thing, can be made only by a registered instrument. 43. Sections 105 and section 108 of the Transfer of Property Act, 1882 pertains to leases of immovable property. Section 105 of the said Act defines "lease" to mean a lease of immovable property is a transfer of a right to enjoy such 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. Lessor, lessee, premium and rent is further defined as the transferor....
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....y further transfer which is the same right to occupy/possess will continue to remain as supply of service. It was submitted that characteristics of interest in immovable property on further transfer would not change only because the lessee-assignor effects absolute transfer in favour of assignee with respect to leasehold rights. 51. This submission seems to be very attractive at the first blush, however, there are two transactions, one when the GIDC allots plot of land along with right to occupy, right to construct, right to possess on long term lease basis, it is nothing but supply of service as right of ownership of plot in question remains with the GIDC which will revert back on expiry of lease period whereas transaction of sale and transfer of leasehold rights by the lessee- assignor in favour of assignee divest lessee-assignor of all the absolute rights in the property. Therefore, interest in the immovable property in form of leasehold rights cannot be said to be different than the immovable property itself. Section 2(119) of the GST Act defines "works contract" being a contract for building, construction, fabrication, completion, erection etc., of any immovable prope....
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....ct is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words." 54. Rowlatt J, has expressed the principle in following words "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 67. In such circumstances, the contention raised on behalf of the petitioner that leasehold rights are nothing but interest in immovable property as per the provision of section 105 read with section 108(j) of the Transfer of Property Act constituting absolute transfer of right in such property because transfer of such leasehold right extinguishes the estate of the transferor-lessee-assignor in the immovable property and all legal relationships with lessor-GIDC are severed and third party-assignee becomes lessee liable for obligation under the assignment deed vis-à-vis the lessor-GIDC. As the assignor transfers leasehold rights after receiving the consideration as determi....
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...., continue even to apply under the GST regime as the object of introduction of GST is to subsume the existing taxes. 77. In case of Munjaal Manishbhai Bhatt v. Union of India reported in (2022) 104 GSTR 419 (Guj), this court has observed that the intention of introduction of GST regime was not to change the basis of taxation of the Value Added and Service Tax regime and that supply of land in every from was excluded from the purview of GST Act. 78. Moreover, in the facts of the various cases, GIDC had only allotted the plot of land to the lessee who constructed the building and developed the land to run the business or industry for which such plot of land was allotted. Therefore, what is assigned by the lessee/assignor to the assignee for a consideration is not only the land allotted by GIDC on lease but the entire land along with building thereon which was constructed on such land. The entire land and building is therefore, transferred along with leasehold rights and interest in land which is a capital asset in form of an immovable property and the lessee/assignor earned benefits out of land by way of constructing and operating factory building/shed which constit....
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....er No. 183600 dated 12.07.2016 drawn on HDFC Bank in the name of "M/s, Supertex Woven Industries". We have transferred, surrendered and relinquished possession of the said premises to the Owners -SUMER BUILDCORP PVT. LTD., and we hereby state and declare that we no longer have any right, title and interest of any nature whatsoever in respect of the said premises more particularly described in the Second Schedule hereunder written or any other premises in "Atias Mills Compound" situate at Reay Raod, Mazgaon, Mumbai, which said property is more particularly described in the First Schedule hereunder written. 3. We state and declare that the Owners -Sumer Buildcorp Pvt. Ltd. and/or their nominees are entitled to use and occupy the said premises described in the Second Schedule hereunder written and deal with the same in such manner as they deem fit and proper, the same having been surrendered by us to them." The above declaration shows that the consideration amount received by the appellant is a sort of compensation received from the owner for surrendering and relinquishing Tenancy and Occupancy Rights. 5.6 We also find that CESTAT Kolkata in the case of M/s Bhaskar stee....