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TMI Blog2024 (8) TMI 1375X X X X Extracts X X X X X X X X Extracts X X X X ..... ke it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression 'GST Act' would mean the CGST Act and the WBGST Act both. 1.2 The applicant submits that he has entered into a leasing agreement with the Shyama Prasad Mookerjee Port, Kolkata (hereinafter referred to as SMPK), a body incorporated under the Ministry of Ports, Shipping and Waterways, Government of India, wherein, the SMPK has agreed to lease a industrial plot of land at Taratala Road for a period of thirty years (30 years) for setting up commercial office complex. The applicant made an application on 11.10.2022 seeking an advance ruling before the West Bengal Authority for Advance Ruling (hereinafter referred to as the WBAAR) whether the upfront premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity directly or through an entity which is wholly owned by the Central Government, State Government or Union territory. NIL Provided that the leased plots shall be used for the purpose for which they are allotted, that is, for industrial or financial activity in an industrial or financial business area: Provided further that the State Government concerned shall monitor and enforce the above condition as per the order issued by the State Government in this regard: Provided also that in case of any violation or subsequent change of land use, due to any reason whatsoever, the original lessor, original lessee as well as any subsequent lessee or buyer or owner shall be jointly and severally liable to pay such amount of central tax, as would have been payable on the upfront amount charged for the long term lease of the plots but for the exemption contained herein, along with the applicable interest and penalty: Provided also that the lease agreement entered into by the original lessor with the original lessee or subsequent lessee, or sub-lessee, as well as any subsequent lease or sale agreements for lease or sale of such plots to subsequent lessees or buyers or owners shall incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : That is to say any building or part thereof where groups of people congregate or gather for amusement or recreation or for social, patriotic, civil, travel, sports and similar other purposes as the principal use excluding and except club, religious and political purpose. Such building shall include theatres, motion picture houses, drive-in-theatres, city halls, town halls, auditoria, exhibition halls, museums, skating rinks, gymnasiums, restaurants, eating houses, bars, hotels, boarding houses, dance halls, gymkhanas, passenger station and terminals of air, surface and other public transportation services, recreation piers and stadiums. 8.3 "Business building": That is to say any building or part thereof used principally for transaction of business for keeping of accounts and records or for similar purposes. Such building shall include offices, banks, professional establishments, court houses if the principal function of such offices, banks, professional establishments or court houses is transaction of public business or keeping of books and records. Such building shall also include buildings or premises solely or principally used as an office or for office purpose. 8.4 "Merc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment department. 2.6 The applicant argues that SMPK in its official website "smportkolkata.shipping.gov.in" has declared vide notice dated 14.12.2018 bearing reference number FIN/368/B that SMPK is covered under the category of notified persons under notification number 50/2018 Central Tax dated 13.09.2018 and is required to deduct tax under section 51 of CGST/WBGST Act 2017. SMPK is therefore registered as a tax deductor in the state of West Bengal bearing registration number 19AAAJK0361L1DC. 2.7 Section 51 of the GST Act provides deduction of tax at source by the following persons: (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) Governmental agencies; or (d) such persons or category of persons as may be notified by the Government on the recommendations of the Council, Notification No. 50/2018-Central Tax dated 13.09.2018 further requires to deduct tax under section 51 by the following persons: (a) an authority or a board or any other body,- (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with fifty-one per cent or more participation by way of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdless of any actual or constructive control. Ownership rights are general, permanent and inheritable." The Applicant states that the control of the said Major Ports rests with the Central Government as there is no share capital in such organisations to determine the ownership in terms of percentage of share capital. However, as per the audited financial statement of SMPK it is clear that the audit of the same is done by the C&AG under Section 19 (2) of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 read with Section 44 (2) of the Major Port Authority Act 2021 and everywhere in the audit report the regulations of The Ministry of Ports, Shipping and Waterways (MPSW), Government of India has been referred to. Therefore, it can be averred that SMPK satisfies the third condition stated above. 2.12 In regard to the last condition, the applicant submits that it is a manufacturing company duly registered under CGST/WBGST Act, 2017 and has manufacturing units in the state of West Bengal. Therefore, the applicant fulfils the last condition mention above as well. Submission of the Revenue The officer concerned from the revenue has expressed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements undertake to comply with the same." (emphasis inserted) 3.2 On the basis of the above condition, not only the plot should be used for industrial or financial activity but also the area where the plot is located should be an industrial or financial business area. 3.3 Industrial area means any area declared to be an industrial area by the State Government by notification in the Official Gazette, which is to be developed and where industries are to be accommodated. In the application, the applicant did not produce any evidence on the nature of the land and area to prove it as industrial business area. 3.4 Besides, in the petition itself, the applicant sought for advance ruling on exemption only on the ground of the services of leasing land for industrial purpose, so, the applicant did not go into "the financial activity" or "financial business area" clauses. Hence, the comments are restricted only on industrial perspective. 3.5 It is mentioned in the allotment letter that the land was leased for "setting up commercial office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , being an activity carried on by a co-operative society or a club or any other like body of individuals, if the number of persons employed by the co-operative society, club or other like body of individuals in relation to such activity is less than ten;" 3.7 In the application, the allotment letter does not specify structure or activities of "commercial office complex". Also the applicant did not produce any document that can describe the activities to be done in that commercial office complex and whether such activity fulfills all conditions to be termed as "industrial activity". 3.8 Furthermore, in order to qualify for the exemption as per the afore-mentioned entry of this notification as applicable in this case, SMPK is required to qualify as i) State Government Industrial Development Corporations or Undertakings, or ii) Any other entity having 20% or more ownership of Central Government, State Government, Union Territory 3.9 SMPK is governed under the Major Port Authorities Act, 2021 (referred hereinafter as "the Act"). Under section 3 of the Act, the Central Government constitutes a Board, in respect of each Major Port (including SMPK). The Board of Major Port Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decides the rate for assets and services available at SMPK, as prescribed in Sec 27 of the Act, and there is no control of the Central Government for such. 3.14 Section 33 of the Act empowers the Board to take financial decisions, like it can raise loans for its capital expenditure or working capital requirements. The loans may be raised by Board in the open market within India and in any country outside India on port securities including but not limited to debentures, bonds and stock certificates issued by the Board or may be obtained from the Central Government or a State Government. 3.15 The Central Government only has supervisory power as prescribed in Chapter V of the Act. Relevant portion of Section 48 of the Act is as follows: "48. (1) If, at any time, the Central Government is of the opinion-- (a) any Board is unable to perform the duties imposed on it by or under the provisions of this Act or of any other law for the time being in force; or (b) that any Board has persistently made defaults in performance of the duties imposed upon it by or under the provisions of this Act or of any other law for the time being in force and as a result of such default, the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Government had no control over the management in that period and the Central Government only plays a supervisory role. It is also to be mentioned here that the Central Government is liable to place a full report to be laid before the Parliament for taking control of the management of the Board, as prescribed u/s 49 of the Act. When the board of SMPK takes administrative and financial decisions, raises loans, pays salaries and other financial benefits to its employees and retired employees, decides the rate for assets and services available at the port, creates master plan for infrastructural projects, without any intervention from the Central Government, it should not considered that the Central Government has an ownership, by way of control, in SMPK. Hence, SMPK is controlled by the Board which is an autonomous body. 3.17 SMPK is audited by the Comptroller and Auditor General of India. Art 149 of the Constitution of India mentions - "The Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpted under entry 41 of Notification No. 12/2017-CGST (Rate) dated 28.06.2017? Observations & Findings of the Authority 5.1 We have gone through the records of the issue as well as submissions made by the authorized advocate of the applicant during the course of personal hearing. We have also considered the submission made by the officer concerned from the revenue. The issue before us is to determine whether the services of leasing of an industrial plot of land at Taratala Road for a period of thirty years (30 years) for setting up commercial office complex against upfront lease premium provided by SMPK to the applicant is exempted from payment of tax or not in terms of entry number 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. 5.2 The crux of the contention of the applicant is that the applicant being an industrial unit has entered into an agreement for having leased out land for a period of thirty years for setting up commercial office complex against upfront lease premium. According to the applicant, the aforesaid factual position leaves no doubt that the applicant has fulfilled all the conditions as specified in entry number 41 of Notification No. 12/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that in case of any violation or subsequent change of land use, due to any reason whatsoever, the original lessor, original lessee as well as any subsequent lessee or buyer or owner shall be jointly and severally liable to pay such amount of central tax, as would have been payable on the upfront amount charged for the long term lease of the plots but for the exemption contained herein, along with the applicable interest and penalty: Provided also that the lease agreement entered into by the original lessor with the original lessee or subsequent lessee, or sub-lessee, as well as any subsequent lease or sale agreements, for lease or sale of such plots to subsequent lessees or buyers or owners shall incorporate in the terms and conditions, the fact that the central tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements undertake to comply with the same." [emphasis supplied] 5.6 The applicant has argued that by setting up their commercial office complex, all the financial activities shall be undertaken. He has also argued that as per the sketch of the plot annexed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se an industrial plot for financial business from SMPK, the said supply of services doesn't fulfill all the conditions as specified in the relevant entry of the exemption notification supra. 5.10 Now we take the issue to decide the third condition for availing the benefit of exemption as per the aforesaid entry, i.e. whether service provider is a state Government Industrial Development Corporation or Undertaking or any other entity having 20 per cent. or more ownership of Central Government, State Government, Union territory (either directly or through an entity wholly controlled by the Central Government, State Government, Union territory). 5.11 The applicant argues that SMPK deducts tax under section 51 of the GST Act and the control of the said Port rests with the Central Government as there is no share capital in such organisations to determine the ownership in terms of percentage of share capital. Therefore, the status of the service provider, as specified in the notification, gets satisfied in the instant case. 5.12 The applicant also states that as per the audited financial statement of SMPK it is clear that the audit of books of accounts of SMPK is done annually by Compt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the fourth condition for availing the benefit of exemption as per the aforesaid entry i.e. the service recipient must be an Industrial Unit, there is no dispute whatsoever. 5.17 Thus, as discussed above, we are of the view that the services provided by SMPK by way of grant of long term lease of land at Taratala Road for a period of thirty years (30 years) for setting up commercial office complex to the applicant, as involved in the instant case, doesn't satisfy all the conditions specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended. In view of the above, we rule as under: RULING Question: Whether the upfront premium payable by the applicant towards the services of by way of granting of long term lease of thirty years, or more of industrial plots or plots for development of infrastructure for financial business by SMPK is exempted under entry 41 of Notification No. 12/2017-CGST (Rate) dated 28.06.2017? Answer: Services by way of grant of long term lease of land by SMPK to the applicant for the purpose of "setting up commercial office complex' as involved in the instant case is found not to be covered under entry 41 of Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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