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In The Matter of Greater Noida Industrial Development Auth. Versus Commissioner of Customs, Central Excise And 6 Others

2015 (4) TMI 661 - ALLAHABAD HIGH COURT

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 various plots allotted by the assessee for business/ commercial purposes and rent charged/ collected .....

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erm 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 section is concerned. - No illegality in the conclusions drawn by the Tribunal that the lease of .....

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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 considered for computation of service tax, it will not mean that the Tribunal has held that a pa .....

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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 behalf of appellant and Sri Ashok Singh on behalf of department. 2. The present excise appeal has .....

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se 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 constituted under the U.P. Industrial Development Act, 1976. It is their case that they have been discharg .....

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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 service in relation of such renting for use in course of, or for furtherance of business or commerce. .....

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, 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 of Central Board of Excise & Customs (Department of Revenue) dated 26.02.2010 whereunder it w .....

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uot;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 or coaching centre. Explanation-I to Section-65(90a) clarified that- for the purpose of this cla .....

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trol 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 period 01.07.2010 to 31.05.2011, whereunder it was disclosed that the appellant received a total amoun .....

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xcise 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 the required information and to produce the documents. 9. Against the above order of the Commissio .....

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culated 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 Tax, Noida vide order-in-original dated 30.04.2013. He confirmed the demand of service tax of ͅ .....

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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. The assessee being aggrieved has filed the present central excise appeal. 14. The present centr .....

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overed 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?" 15. An application has been filed on behalf of the .....

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nalysis 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, when it is held that allegation of ingredients under the proviso to subsection (1) of section 7 .....

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sideration 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 subject matter of the first show cause notice dated 22nd March, 2012. It has also been contended bef .....

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erty, 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 commerce" to include use of immovable property as factories, office buildings, warehouses etc. and .....

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he 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 transfer of ownership of the land does not appeal to us especially in view of the simple meaning of th .....

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tion 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" would cover a lease for any period including a lease in perpetuity, as will follow from simple rea .....

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ent 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. Judged in the aforesaid background we do not find any illegality in the conclusions drawn by th .....

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ether 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 demand as made under the order in original dated 19th July, 2012 only for the normal period of lim .....

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tion 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 and to given a specific finding on the plea of overlapping raised by the assessee. 30. It is left .....

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rcular 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/fu .....

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ided 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 statutory activity and the same is undertaken for a consideration (not a statutory fee), then in su .....

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ctivities 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 Cooperative Ltd. v. Deputy Commissioner of Income Tax passed in Income Tax Appeal No. 205 of 2010 .....

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