By TIOL News Service

MUMBAI, JULY 30, 2014: M/s CIDCO, a corporation registered under the Companies Act, 1956 and wholly owned by the Government of Maharashtra, is a New Town Planning & Development Authority entrusted with the job of development of Navi Mumbai under the Maharashtra Regional Town Planning Authority under the said Act for developing certain towns. For the purpose of development, the Government of Maharashtra acquired privately owned land in the project area from various people on payment of consideration and CIDCO was authorized to lease the land for the purpose of creating infrastructure. CIDCO, on behalf of the Government of Maharashtra, leased the land to the intending lessees for an initial period of four years for construction of building, factory or complexes on the same and on completion of the construction activities it entered into another lease agreement for a long period (more than 12 years). The lease amount was collected by way of premium at the time of entering into the ‘agreement to lease' and by way of rental, when the ‘lease agreement' was entered into by CIDCO.

The department was of the view that the activity undertaken by CIDCO falls under the taxable service category of "renting of immovable property service" and on the amounts collected by way of premium and rental, the service tax liability was quantified at Rs.136.56 crore.SCN dated 19/10/2012 was issued for the aforesaid purpose and the demand is for the period 01/06/2007 to 31/03/2012.

The Commissioner of Service Tax, Mumbai confirmed a service tax demand of Rs.136.56 Crores along with equivalent penalty.

The appellant is before the CESTAT.

Following are definitions which the Bench referred to -

Renting of immovable property - Section 65 (90a) -

"renting immovable property includes, renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce."

Taxable services - Section 65 (105) (zzzz) -

"any service provided or to be provided to any person by any other person by renting of immovable property or any other service in relation to such renting for use in the course of or for furtherance of business or commerce.

The Bench observed -

+ With effect from 01/07/2010, vacant land given on lease or licence for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce was also brought under the service tax levy.

+ The expressions other similar arrangements used in Section 65(90a) and any other service in relation to such renting used in Section 65 (105) (zzzz) are expressions of width and amplitude. It would include not only the actual leasing or renting but also any other activity in relation to such leasing/renting. Therefore, the agreement to lease which is entered into prior to the actual leasing and which is in relation to the lease undertaken subsequently subject to construction of building, etc. would also come within the purview of service tax levy with effect from 01/07/2010, if not before. Therefore, the distinction sought to be made by the appellant in respect of "agreement to lease" and the "lease agreement" would not matter and the levy would apply, in both the situations. [Apex court decision in Doypack Systems Ltd. Vs. UOI - 2002-TIOL-389-SC-MISC referred to]

+ As regards the argument that the appellant was an agent of Government of Maharashtra and was performing a statutory function and therefore, the levy of service tax would not apply, this argument is completely misplaced. [Supreme Court decision on a reference made by the President of India in the context of Section 20 of the Sea Customs Act, 1878 reported in 1964 (3) SCR 787 relied upon along with the decision in A.P. State Road Transport Corporation v. ITO [2002-TIOL-1011-SC-IT-CB]

+ Contention that levy would apply only with effect from 01/07/2010, with the insertion of clause (v) in Section 65 (105) (zzzz) which provided for levy on "vacant land given on lease or license for construction of building or temporary structure at a later stage to be used for the furtherance of business or commerce", appears to have some merit inasmuch as prior to 01/07/2010, there was no provision for levy of service tax on vacant land given on lease.

+ Issue of time bar is both a question of fact and a question of law which could be considered at the time of final hearing of the appeal.

+ Although financial hardship has been pleaded by the appellant, no evidence has been produced. Be that as it may, the interest of the Revenue needs to be protected. [Apex Court decision in Assistant Collector Vs. Dunlop India Ltd. - 2002-TIOL-156-SC-CX relied upon.]

Holding that the appellant does not have a prima facie case, especially for the period post 01/07/2010 and taking into account the financial hardship pleaded, the Bench directed the appellant to make a pre-deposit of Rs.20 crores for obtaining stay.

(See 2014-TIOL-1368-CESTAT-MUM)