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2015 (4) TMI 661 - ALLAHABAD HIGH COURT

2015 (4) TMI 661 - ALLAHABAD HIGH COURT - 2015 (40) S.T.R. 95 (All.) , [2016] 87 VST 496 (All) - Demand of service tax - rent which had been received in the matter of allotment of plots by the assessee to use for construction for business/commercial purposes during the terms of the lease - an act of sovereign/public duties/functions or not - Held that:- In view of the definition of expression of "renting of immovable property" read with Explanation, in our opinion, will include the lease of vari .....

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of Explanation 1 to Section 65 (105) (zzzz) of the Finance Act, 1994.

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 distinction in the mater of long term lease/lease in perpetuity or lease for short duration, so far as the charging .....

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d not on payment of statutory fees, neither it is a statutory service performed by the assessee. It may be that the statute permits such activities of letting out of immovable property for augmenting its finances but the same cannot be termed as the service in public interest nor it is a mandatory or statutory functions of the Development Authority. Accordingly such activity of leasing, do constitute a taxable service, in our opinion.

If the Tribunal has held that only rent charged be .....

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nt has therefore, to be rejected. - questions as raised by means of the present excise appeal are answered against the assessee and in favour of the department - No error in the order of the Tribunal - Decided against assessee. - Central Excise Appeal No. - 54 of 2015 - Dated:- 30-3-2015 - Arun Tandon & Dr Satish Chandra, JJ. For the Appellant : Chandra Kumar Rai and J K Mittal For the Respondent : Ashok Singh, Sr. S.C. JUDGEMENT 1. Heard Sri J.K. Mittal assisted by Sri Chandra Kumar Rai on .....

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r the normal limitation period and the matter has been remanded to the Commissioner, Central Excise for quantifying the same. The penalty imposed upon the appellant under Sections-77 & 78 of the Finance Act, 1994 has been setaside. With regard to the order-in-original dated 30.04.2013, a direction has been issued to the Commissioner for de-novo adjudication in light of the direction issued in the order of the Tribunal. 3. The assessee before this Court claims to be a statutory body constitut .....

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ted out by it for business or commerce. However, the assessee had not made payment of service tax on the rent which it had received in the matter of allotment of plots of vacant land to various persons on lease for industrial and commercial purposes. 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 servi .....

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y for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities." 5. However, w.e.f. 01.07.2010, clause (V) was added to the definition of immovable property and it now covers vacant land given on lease or licence for construction of a building or temporary structure at a later stage, to be used for furtherance of business or commerce. A notification was issued by the Research Unit .....

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ession renting of immovable property is defined under Section-65(90a) which reads as follows:- "Renting, letting, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include:- i. renting of immovable property by a religious body or to a religious body; or ii. renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training .....

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ting the use of space in an immovable property, Irrespective of the transfer of possession or control of the said immovable property". 7. The Director General of Central Excise on the material evidence collected found that the appellant before this Court has shown income from leasing of vacant land for the purpose of construction of commercial buildings, but they had not paid any service tax thereon. Accordingly, a show cause notice dated 19.03.2012 was issued to the appellant for the perio .....

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1994 be not imposed. 8. The show cause notice was adjudicated upon by the Commissioner, Central Excise and Service Tax, Noida vide order-in-original dated 19.07.2012, the demand was confirmed alongwith interest thereon under Section-75. Penalty of equal amount was imposed on the appellant under Section-78 of the Finance Act, 1994. Another penalty of ₹ 200/- per day starting from the first day after the due date was imposed under Section-77(1)(c) upon the appellant, for failure to furnish t .....

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lotees on which service tax was payable and had not been paid. The quantum of service tax was calculated as ₹ 1,40,74,64,342/- alongwith interest. 11. A second show cause notice dated 17.10.2012 was issued to the appellant for recovery of abovementioned amount. The appellant was also called upon to show-cause as to why penalty under Sections-76, 77 & 78 of the Finance Act, 1994 be not imposed. 12. This show cause notice was adjudicated by the Commissioner, Central Excise and Service Ta .....

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3. The Tribunal under the order impugned dated 28th August, 2014 has confirmed the demand of the service tax under the order in original dated 19th July, 2012 only for the normal period of limitation period to be quantified by the Commissioner on remand. Penalty on the appellant under Sections 77 and 78 has been set aside. The order in original dated 30th April, 2013 has been set aside and the matter has been remanded to the Commissioner for de-novo adjudication in light of the order of Tribunal .....

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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 .....

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w cause notice dated 22.03.2012 and second show cause notice dated 17.10.2012 is issued without analysis merely by picking up the figures from balance sheet?" 16. The applicant-appellant has also prayed for framing of additional substantial question of law, which reads as follows: "Whether demand for the normal period can be confirmed under sub-section (1) of section 73 when the demand was raised in SCNs on the allegation of ingredients under the proviso to subsection (1) of section 73 .....

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tself has come to a conclusion that the premium charged for such lease will not be taken into consideration for the purposes of determining the tax liability. It is their case that transactions cannot be held to be taxable for one part and not for the other. It is further contended that the second show cause notice dated 17th October, 2012 was non est including the consequential adjudication inasmuch as the period mentioned in the second show cause notice included the entire period which was sub .....

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lease . 19. The Explanation to Section 65 (105) (zzzz) of the Finance Act defines immovable property, which includes vacant land. The Expression renting of immovable property as defined under Section 65 (90a) means renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce. The Explanation to Section 65 (90a) has further clarified the clause "for use in the course or furtherance of business or commer .....

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ted by the assessee for business/ commercial purposes and rent charged/ collected in respect of the lease so executed would necessarily be subjected to service tax. 21. We may record that the term/period of the lease whether it is for short duration or for 90 years or perpetuity makes absolutely no difference to the meaning of the expression "renting of immovable property". The contention of the assessee that since long term lease of 90 years/perpetuity would virtually amounts to trans .....

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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. st 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" w .....

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. R.N. Kapoor reported in AIR (1959) SC 12262, Pr. 28, wherein it has been held that if the document creates an interest in the property, it is a lease and if it further goes on to show exclusive possession of the property, it would be a strong case for the same being treated as a lease. It has been held that under Section 105 of the Transfer of Property Act, transfer of a right to enjoy immovable property made for a certain time in consideration for a price paid or promised would be a lease. 26 .....

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etween May, 2007 to March, 2012 is concerned, the Tribunal has held that it is not clear as to whether service tax demanded under show-cause notice dated 22nd March, 2012 is included in the show cause notice dated 17th October, 2012 for want of cooperation from the assessee. It is for this purpose that the Tribunal has remanded the matter to the Commissioner to examine the said plea by de-novo proceedings and to give a specific finding in that respect. The Tribunal has accordingly affirmed the d .....

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ollowing amounts: (a) one time premium amount; (b) annual lease rent; (c) fee charged for examination of the applications; (d) transfer charges; (e) rent received from the staff (f) other misc. income as compliance fees etc. (g) misc. income as malba charges etc. 29. We may not dilate any further on the said aspect, inasmuch as the Tribunal under the order impugned has already remanded the matter to the Commissioner to examine the challenge to the second show-cause notice by de novo proceeding a .....

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stinction 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 broad .....

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are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. 33. Therefore, such activities assigned to an performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purposes of levy of service tax. 34. However, if a sovereign/public authority provides a services, which is not in the nature of an st .....

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er it is a statutory service performed by the assessee. It may be that the statute permits such activities of letting out of immovable property for augmenting its finances but the same cannot be termed as the service in public interest nor it is a mandatory or statutory functions of the Development Authority. Accordingly such activity of leasing, do constitute a taxable service, in our opinion. 36. The judgment relied upon by the learned counsel for the petitioner in the case of Krishak Bharati .....

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