2015 (10) TMI 296 - HC - Service Tax

Levy of service tax on letting out of vacant land in furtherance of business and commerce - w.e.f. 01.07.2010 or w.e.f. 01.06.2007 - Held that - The findings of the tribunal in case of NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY Versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX 2014 (1) TMI 1203 - CESTAT NEW DELHI are legally justified - 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 clarificatory endeavour, 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. The statement of objects and reasons accompanying the Finance Bill, 2010 also clarify that clause 75 of the Bill seeks to amend Chapter V of the Finance Act, 1994; to modify the scope of certain taxable services including the taxable service defined and enumerated in Section 65(105)(zzzz) , of the Act. These several contemporaneous exposition and administrative constructions and the scope of sub-clause (v) of Explanation I in Section 65(105)(zzzz) fortify the conclusion the scope of sub-clause (v). To modify and expand the scope of the taxable service to cover and include vacant land on lease or licence for construction of a building or a temporary construction at a later stage to be used for furtherance of business or commerce, within the ambit of immovable property is thus the taxable service. Since the introduction of this sub-clause in Explanation I expands the scope of the taxable service and renders the taxable (a) hitherto non-taxable transaction, and absent of explicit retrospective reach provided to the amendment and insertion of this sub-clause, these transactions covered by this sub-clause of the Explanation have only the prospective operation. 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. - Decided in favor of assessee.

Summary

Issues Involved:
1. Whether renting of vacant land for construction of buildings or temporary structures for business or commerce is taxable prior to 01.07.2010.
2. Interpretation of the legislative intent behind the inclusion of clause (v) in Section 65(105)(zzzz) of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Taxability of Renting Vacant Land Prior to 01.07.2010:
The primary issue revolves around whether the renting of vacant land by way of lease or license for the construction of buildings or temporary structures for business or commerce purposes was taxable before 01.07.2010. The Tribunal held that such renting became taxable only from 01.07.2010. The department argued that the renting of vacant land was already under the ambit of service tax from 01.06.2007, as per Section 65(105)(zzzz) of the Finance Act, 1994. The Tribunal, however, found that the introduction of clause (v) in Explanation I significantly altered and extended the scope of taxable service effective from 01.07.2010. This clause included vacant land given on lease or license for construction to be used for business or commerce within the definition of "immovable property." Prior to this amendment, vacant land was explicitly excluded from the ambit of immovable property, and thus, renting such land was not taxable.

2. Legislative Intent Behind Clause (v):
The second issue concerns the interpretation of the legislative intent behind the insertion of clause (v) in Section 65(105)(zzzz) of the Finance Act, 1994. The department contended that the clause was merely clarificatory and that vacant land other than for agricultural or similar purposes was already taxable. The Tribunal, however, concluded that clause (v) was an amendment that expanded the scope of taxable service prospectively. The Tribunal referred to the memorandum explaining the provisions of the Finance Bill, 2010, and the Board Circular No.334/2010-TRU dated 26.02.2010, which clarified that the amendments aimed to include renting of vacant land for construction for business or commerce within the taxable service. The Tribunal emphasized that the amendment modified the scope of the taxable service and rendered previously non-taxable transactions taxable from 01.07.2010.

Conclusion:
The Tribunal's findings were upheld by the High Court, which agreed that the renting of vacant land for the construction of buildings or temporary structures for business or commerce became taxable only from 01.07.2010. The court dismissed the department's appeal, affirming the Tribunal's interpretation that the legislative intent behind clause (v) was to expand the scope of taxable service prospectively and not retrospectively. The excise appeal was dismissed, and any interim orders were discharged.