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TMI Blog2025 (4) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up a 300 TPD Oxygen Plant. Both the plants are to be set up at ISPAT's premises. 1.3 Under the agreement dated 02.01.2004, certain equipment required for setting up of the plant facilities were provided by ISPAT (termed as 'ISPAT equipment' under the agreement). Those ISPAT equipment were provided free of cost to the appellants for setting up of the Gas Plant. The ownership of that equipment always remained with ISPAT and the appellants do not have any interest in the same. Apart from the ISPAT equipment, ISPAT also provides power and water. The site on which the plant is required to be set up is provided by ISPAT. The site consists of a plot of developed land. According to the agreement, the appellants have no interest in the land provided by ISPAT. The appellants only have a right of access to the site to carry out their obligations under the agreement. The rest of the equipment (other than the ISPAT equipment) were procured by the appellants themselves. For the equipment, intended to be procured by the appellants from overseas suppliers, ISPAT took out EPCG licence for importing the equipment under the EPCG scheme and undertook to fulfill the export obligations provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed investigation into the matter, the department had concluded that the appellants are liable to pay service tax on the lease rental paid by ISPAT under the category of 'Renting of immovable property service', defined Section 65(90a) read with Section 65 (105) (zzzz) of the Finance Act, 1994 (hereinafter for short, referred to as the 'Act of 1994'). 2.2 On the basis of investigation, the department had initiated show cause proceedings against the appellants, alleging that the plant set up by them on ISPAT's site includes the building, various machinery, pipes, equipment etc., and the plant is permanently fixed to the earth and therefore, it is an immovable property. According to the department, the plant cannot function unless it is permanently fastened to the earth. In this context, the department had relied upon the definition of 'immovable property', contained in Section 3(26) of the General Clauses Act, 1897. Thus, the department had averred that though the civil works may be substantially damaged while removing the plant, but the fact remains that the plant is immovable. Further, it has also been averred that the plant has not been classified under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant in question cannot be functional, unless those become immovable or permanently fastened to earth; that the plants were erected by use of various civil engineering techniques viz., digging, piling, civil construction, electrical installation etc., to support the immovability and thus, no Central Excise duty liability was discharged by the appellants, considering the same as 'immovable property'; that those plant facilities having been used as immovable property in the course of furtherance of business or commerce, the appellants are liable to pay service tax on renting of such property, under the taxable category of 'renting of immovable property service'. 3. Feeling aggrieved with the impugned orders dated 03.01.2012 and 31.10.2013, the appellants have preferred these appeals before the Tribunal. 4.1 Shri V. Sridharan, learned Senior Advocate appearing for the appellants submitted that for the purpose of 'Renting of Immovable Property Services', the term 'Immovable Property' covers only 'Building', 'Land' and 'Common Areas and Facilities relating thereto'. By referring to the definition contained in Section 65 (105) (zzzz) ibid, he submitted that the legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of service tax under the head of such taxable service. He further submitted that by considering the transactions as 'deemed sale', the appellants had discharged the VAT liabilities and the same was also accepted as due discharge of the tax liabilities by the jurisdictional VAT authorities. 4.4 Learned Senior Advocate submitted that the land on which, the plants are set up belong to ISPAT; that the agreements clearly state that the appellants shall not have any interest in the land, apart from the right of access for the limited purpose of fulfilling the obligations under such agreements. Further, he also pleaded that the economic life time of a plant is 35 years, whereas the term of the agreement is only for a period of maximum 25 years (15 + 10) in case of 1260 TPD plant and similarly the life time is 15 years (10 + 5) in case of 300 TPD plant; thus, the life of the plant is much more than the outer limit of the contract period. He has also referred to the terms of the agreement to state that the appellants are required to dismantle and remove the plant from the premises of ISPAT within a specified period of time. By referring to the above aspects of control over the land, limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent and perused the case records, including the written note of submissions filed by both sides during the course of hearing of these appeals. 7. The issues involved in these appeals, for consideration by the Tribunal, are as under: (a) Whether the appellants would be considered as the absolute owner of both the gas/oxygen plants, and whether the lease rentals received by them, would be subjected to levy of service tax under the taxable category of 'Renting of immovable property' service? (b) Whether, setting up of gas/oxygen plants by utilizing the equipment supplied by both the appellants as well as ISPAT would be considered as 'immovable property', in order to fall within the scope and ambit of 'Renting of Immovable property', as defined under Section 65(90a) read with Section 65 (105) (zzzz) of the Act of 1994 for levy of service tax thereon; especially under the circumstances, when those equipment were removed in the disassembled condition, after closure of the contract period? (c) Whether the phrase 'immovable property' as per the Explanation 1 appended to Section 65 (105) (zzzz) of the Act of 1994 would cover only the properties itemized therein viz., 'build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that since the equipment supplied by both are involved in setting up of the plant facilities, the appellants alone cannot be treated as the absolute owner, in order to be saddled with the service tax liability for provision of the alleged taxable service under the category of 'Renting of immovable property'. 9.1 In order to ascertain, whether an article attached to the land can be regarded as the movable or immovable property, the primary and essential requirement is to find out the intention of the parties, who arrive at the conclusion of accomplishing a certain purpose or act. Such objective can be achieved by wholistically reading the entire contents in the agreement, entered into between such parties. In the case in hand, the land on which the plant is set up, belongs to ISPAT. The agreement clearly states that the appellants shall not have any interest in the land, apart from the right of access for the limited purpose of fulfilling the obligations under the agreement. On reading of both the agreements, it would transpire that though the economic lifetime of a plant is 35 years, but in the case in hand, in respect of 1260 TPD plant, the contract period as per the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory in the premise of CEAT Tyres, Gujarat INOX factory at Thana A-2 2003-2004 Transferred to our new plant in the premises of CEAT Tyres in FY 2017-18 and is in operation. 3 N2O Plant INOX factory at Patalganga (PG) INOX factory at Thana A-2 2003-2004 Shifted in 2016-17 from Thana to PG. Presently is in operation at PG. 4 45 TPD LIN Liquefier INOX factory at Karjan INOX Jejuri Factory 2010-2011 Shifted in 2016-17 from INOX Jejuri Factory to Karjan Presently is in operation at Karjan. 5 600 SM3/Hr INOX factory at Tadipatri INOX Jejuri Factory October 2004 Shifted in 2018-19 from INOX Jejuri Factory to Tadipatri. 6 600 CUM Rathi Ispat Ltd at Ghaziabad JSPL, Raigad 2004-2005 Shifted in 2004-05 from JSPL to Rathi Ispat Ltd 7 200 CUM (2Plants) Rathi Ispat Ltd at Ghaziabad Mukund Ltd, Kalwe 2004-2005 Shifted in 2004-15 from Mukund to Rathi Ispat Ltd Other plants - 300 TPD and Karjan old plant Sr. No. Name of Unit Year of capitalisation Remarks 1 INOX factory at Karjan having 75 TPD capacity 1993-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Engineer (supra). 9.4 We have also perused the photographs of different plant facilities erected at ISPAT site by the appellants, which were submitted during the course of hearing of the appeals. Sample copies of some of the photographs are captured here under: On careful scrutiny of the available photographs in the case records, we are of the considered view that various individual equipment of the plant are erected, installed and commissioned within the premises of ISPAT by way of fastening to the foundation by the help of nuts/bolts and through installation of the base concrete support, which can be dismantled at any time, without causing much damage to the original equipment. Since, those equipment were not permanently attached to the earth, the same in our view, seized to be considered as 'immovable property' and as such, cannot fall under the scope of the definition provided under 65 (105) (zzzz) of the Act of 1994. 9.5 We find that an identical issue about immovability of the plant came up for consideration before the Hon'ble Supreme Court in the case of Solid & Correct Engineering & Ors. (supra). The issue arose in that case for consideration was, whether er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be by this Court, to be immovable property that ceased to remain moveable or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as moveable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty." 9.7 The ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of immovable property for use in the course or furtherance of business or commerce. Explanation 1. - For the purposes of this sub-clause, "immovable property" includes - (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include - (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2. - For the purposes of this sub-clause, an immovable property partly for use in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, the same phrase can be interpreted to read as 'means'. In such scenario, it has to be construed that the phrase 'includes' would be used in a restrictive sense. On careful reading of the above quoted statutory provisions, it would reveal that the phrase 'immovable property' in normal course, was used to be interpreted as 'buildings' or 'lands'. Therefore, no specific categorization was provided in the main statute, which got clarified by way of providing such categorization of property in the explanation clause. Though, the detailed category of properties were elucidated in the explanation clause, by way of insertion of the phrase 'includes'; but certain exclusion category of properties were also carved out therefrom. Thus, the legislative intent is manifest that the scope of the main section for understanding the meaning of 'immovable property', should only be confined to those prescribed properties, which are itemized in the said explanation clause. In other words, any other property(ies) not conforming to the prescribed properties should fall outside the scope and purview of consideration as 'immovable' for the purpose of the Act of 1994. Therefore, we are of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerally used as a word of extension, but the meaning of the word or phrase is extended, when it is said to include things that would not properly fall within its ordinary connotation; that if the objects specified are 'articles of pottery', then these objects are already comprised in the expression 'potteries industries'; that the inclusion in the list of objects which are well recognized articles of pottery makes it plain that the Explanation was added to the entry not by way of abundant caution; that there cannot be inflexible rule that the word 'include' should be read always as a word of extension, without reference to the context. Upon analysis of the legislative intent in adding the word 'includes' in the Explanation clause, the Hon'ble Court vide paragraph 5 in the said judgment, held as under: ".............Though 'include' is generally used in interpretation clauses as a word of enlargement, in some cases the context might suggest a different intention. Pottery is an expression of very wide import, embracing all objects made of clay and hardened by heat. If it had been the legislature's intention to bring within the entry all possible articles of pottery, it was quite u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals. The reference of those judgements is noted at paragraph 5 above. 12.2 The phrase 'excisable goods' has been defined in Section 2(d) of the Central Excise Act, 1944 to mean, 'goods specified in the Fourth Schedule as being subjected to a duty of excise and includes salt'. An Explanation was added to the said definition clause, providing that 'for the purposes of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable'. In view of the said Explanation, concerning the true essence of the excisable goods, there used to be lot of confusion with regard to consideration of the issue, whether 'plant and machinery' and the structures thereof, since embedded to the earth, can be considered as 'excisable goods'. In the authoritative judgements relied upon by the learned AR for Revenue, the Hon'ble Supreme Court held that plant and machinery permanently fastened to the earth, structures, erections and installations are not excisable goods, since these do not pass the test of marketability i.e., not capable of being bought and sold in the market.&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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