2017 (3) TMI 1221 - AT - Service Tax

Taxability - Renting of immovable property service - vacant land - effective date of levy of tax - whether the service rendered was liable to be taxed in the hands of the appellant from 1st June 2007 merely because of the retrospective effect of the addition of vacant land to the explanation defining immovable property ? - Held that - There is no doubt that as on the date of imposition of levy, the appellant had not indulged in any taxable activity. Even when the amendment came into effect and even if retrospectively effective the transaction between the appellant and the lessee could not be described as that of a lease of vacant land. Consequently, the levy of tax on the rental income derived by the appellant from the lessee is beyond the scope of taxability - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal against order confirming demand for 'renting of immovable property service'.
2. Whether the service rendered was liable to be taxed from a specific date due to retrospective effect of the law.

Analysis:
1. The appeal was filed by the Revenue against an order confirming a demand for 'renting of immovable property service' under the Finance Act, 1994. The Commissioner of Central Excise (Appeals -II), Mumbai - II had confirmed a demand of ?18,92,377/- along with interest and penalties under sections 76, 77, and 78 of the Act. The dispute arose from an agreement between M/s Ganesh Benzoplast Ltd and the appellant for rental of vacant land developed as a tank farm, with the period in question being from June 2007 to September 2011.

2. The key issue in consideration was whether the service provided by the appellant was liable to be taxed from June 2007 due to the retrospective effect of the law. The definition of 'renting of immovable property service' was amended in 2010 to include 'vacant land given on lease', but the appellant argued that the amendment should not apply retrospectively to their situation. The appellant contended that since the building on the land was completed before the tax became applicable in 2007, the rental income derived from the lessee should not be subject to tax based on the retrospective amendment.

3. The Tribunal analyzed the facts and found that the appellant had not engaged in any taxable activity at the time the levy was imposed. The tax liability was extended to include renting of vacant land only in June 2010, and the retrospective effect of this amendment should only apply to situations where the vacant land continued to be so at the time of insertion. Since the building on the land was completed before the tax became applicable, the Tribunal held that the rental income derived by the appellant from the lessee was not within the scope of taxability.

4. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. The judgment was pronounced in court on 21/02/2017 by Shri C J Mathew, Member (Technical) of the Appellate Tribunal CESTAT Mumbai.