ST - renting of vacant land for construction or a temporary structure for use at later stage in furtherance of business is taxable service only from 1.7.2010 and not earlier to this date - Matter remanded: CESTAT
By TIOL News Service
NEW DELHI, JAN 15, 2014: THE appellant had obtained registration on 27.5.2008 for providing the taxable service "renting of immovable property".On receipt of information that the assessee was collecting lease rents under various heads like lease rent (industrial), lease rent (commercial), rent (commercial), rent (industrial), other rents etc. on which service tax is remittable as per provisions of the Act, Revenue initiated the proceedings. Several summons were issued by the Revenue but they were not honoured.
Eventually, on the basis of partial information furnished by the assessee including balance sheet and income and expenditure account for 2007-08 and 2008-09 and provisional income statements for 2010-11 and 2011-12, Revenue inferred that the assessee had provided the taxable service of "renting of immovable property". Revenue further assumed that several receipts by the assessee amounted to the gross consideration received for the specified taxable service and brought the entire component to tax.
Responding to the SCN the assessee inter-alia contended that leasing of vacant land was not comprehended within the ambit of the taxable "renting of immovable property" service prior to 1.7.2010, since only by the Finance Act, 2010 and with effect from 1.7.2010 was clause (v) incorporated in Explanation (1) to clause (zzzz) of Section 65(105); that prior to 1.7.2010 renting of a vacant land was outside the purview of the taxable service; that since the assessee as a statutory Development Authority, created by the provisions of the U.P. Industrial Area Development Act, 1976 had entered into long term leases with third parties whereunder vacant lands were leased to such third parties inter alia for business or commercial purposes on long term leases (of 99 years duration), such leases are substantially in the nature of transfer of ownership and consideration received on such transfers would not amount to consideration received for providing the taxable service enumerated in Section 65(105)(zzzz). In addition to this specific defence the assessee also asserted that invocation of the extended period of limitation was unjustified since it was under a bona fide belief that leasing of vacant land was not taxable service; and that as public authority it could not be attributed with a mala fide intention to transgress provisions of the Act with an intent to evade tax.
The Commissioner of CE & ST, Noida rejected the contentions of the assessee and confirmed the ST demand of Rs.250,62,21,312/- besides imposing interest and penalties.
So, the appellant is before the CESTAT and while reiterating the submissions made before the adjudicating authority also adverted to the Tribunal decision in Greater Noida Industrial Development Authority (2013-TIOL-44-CESTAT-DEL)].
The Bench after examining the provisions held thus -
++ Introduction of sub-clause (v) in Explanation I has significantly altered and extended the scope of the taxable service, with effect from 1.7.2010 and consequently vacant land given on lease or licence, for construction of a building or a temporary structure, to be used at a later stage for furtherance of business or commerce, would be "immovable property and renting of this immovable property would be the taxable service, since 01.07.2010.
++ In view of clear exclusion of vacant land from the ambit of immovable property prior to 1.7.2010 it cannot gainfully be contended by Revenue, that clause (v) to Explanation I (introduced in 2010), was a mere clarificatoryendeavour, explicating the implicit and inherent meaning of Section 65 (105)(zzzz). Clause (v) is clearly an amendment which expands the scope of the taxable service; and prospectively.
++ On the above analysis, renting of vacant land by way of lease or licence (irrespective of the duration or tenure), for construction of a building or a temporary structure for use at a later stage in furtherance of business or commerce is a taxable service only from 1.7.2010, and not so, earlier to this date.
However, the Bench remitted the matter to the adjudicating authority for the following reason –
++ Since the show cause notice did not specifically demand nor the assessee cared to furnish details and particulars of the lease transactions and of the several categories of receipts, in respect of vacant lands leased by it for business or commercial purposes; nor had asserted in defence, which of the leases were not in furtherance of business or commerce; and since the adjudicating authority also did not, in the circumstances, advert to this aspect of the matter, we are not inclined to go into the contention (urged in oral arguments) that part of the lease transactions were for furtherance of purposes other than business or commerce.
Nonetheless, the Bench expressed its displeasure at the conduct of the appellant in failing to co-operate with the Service Tax department in the following words -
"…The appellant is an assessee and cannot delude itself by an assumption that it is immune to the process of law or adopt a condescending attitude towards the formal processes of law. We make it clear that irrespective of its status as a public authority, the appellant is an assessee. We hope and trust that the appellant would conduct itself in future with greater fidelity to the mandate of law, including assessment proceedings."
In fine, the adjudication order was quashed and the matter remitted to the adjudicating authority for passing a fresh adjudication order, commencing from the stage subsequent to the SCN dated 19.10.2012. The Bench gave the appellant 30 days to submit its written submissions and supporting documents and also made it clear that in the event of further unresponsive conduct by the assessee, the adjudicating authority was at liberty to pass orders ex-parte .
(See 2014-TIOL-67 -CESTAT-DEL)
