ST - Assessee had leased out land & water area & granted permission for construction of dry dock, jetty for commercial exploitation - exclusion clause (b) u/s 65(105)(zzzz) does not envisage any restriction as to it is to be put for non-commercial use - not liable to ST: CESTAT
By TIOL News Service
MUMBAI, NOV 03, 2015: DURING the period 01/06/2007 to 28/02/2009, it was alleged that appellant assessee had leased/rented out the Port land to private parties, for carrying out their business activities and this renting out of the property was falling under taxable category of "renting of immovable property" services.
Adjudicating authority confirmed the demand of service tax with interest but dropped the proceedings initiated for levy of penalties. Appellant assessee is aggrieved by the demand of interest while revenue is aggrieved by non-imposition of penalties.
Before the CESTAT, the appellant submitted that they had given the land on lease which was entirely vacant land and the lease rent which is received is only for the lease of vacant land; that vacant land is excluded from the scope of the definition and the words immovable property needs to be considered accordingly; that the structures on the vacant land are constructed by the lessee and are not the property of the appellant; that the appellant charges separately for the facilities like harbour and charges service tax which is paid under the category of Port services. Reliance is placed on the decisions in Cochin Port Trust - 2011-TIOL-1848-CESTAT-BANG, Gujarat Maritime Board - 2013-TIOL-2171-CESTAT-AHM, Mundra Port & Special Economic Zone Ltd., - 2011-TIOL-1321-CESTAT-AHM wherein it is held that vacant land/plots which are leased out are non-taxable.
The AR submitted that if the vacant land is used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes, the same is excluded from immovable property but if vacant lands are put to dual use then the exemption is not available. The decisions in Shubh Timb Steels Ltd - 2010-TIOL-765-HC-P&H-ST & Greater Noida Industrial Development Authority - 2015-TIOL-1008-HC-ALL-ST is relied upon in support.
The definition of the Taxable Service ‘Renting of Immovable Property' at the material time read thus -
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Taxable Service Defined under Section 65(105)(zzzz)
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Taxable Service means 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)
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;
(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, and
(v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce;
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 for the purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
Explanation. 2 - For the purpose of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce
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The Bench, after narrating the facts of the case and considering the aforesaid definition observed thus -
++ It can be seen from the above reproduced definition that renting of property is taxable service from 1/6/2007. We are concerned with the exclusion clause in the definition under Explanation I. Exclusion clause (b) will directly apply in the case in hand. It is undisputed that the land which has been leased out by the appellant is vacant. The said exclusion does not envisage any restriction as to it is to be put for non-commercial use. In our considered view the appellant assessee having leased out the vacant land and the water front, is covered under the exclusion provided in the definition.
Reliance was also placed by the Bench on the decisions in Mundra Port & Special Economic Zone Ltd. (supra) & Gujarat Maritime Board (supra).
Holding that from the factual matrix of the case in hand as also the ratio of the judgements, the activity of leasing out vacant land will not be covered under the category of renting of immovable property, the appeal filed by the assessee was allowed and that of the Revenue was rejected.
(See 2015-TIOL-2352-CESTAT-MUM)
