2018 (10) TMI 477 - AT - Service Tax

Renting of immovable property service - appellant leased out lands to M/s. NLC Tamilnadu Power Ltd. for setting up for coal based Thermal Power Plant at Tuticorin - Held that - The Tribunal in the case of New Okhla Industrial Development Authority 2014 (1) TMI 1203 - CESTAT NEW DELHI has discussed the issue and held that renting of vacant land is not taxable prior to amendment with effect from 01.07.2010 - demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the appellant is liable to pay service tax for leasing vacant land for setting up a coal-based Thermal Power Plant.
2. Whether the vacant land leased out by the appellant falls under the ambit of renting of immovable property service.
3. Whether the appellant is liable to pay interest and penalties for not paying service tax on the lease rent collected.

Issue 1: Liability to pay service tax for leasing vacant land:
The appellant leased out lands to a company for setting up a Thermal Power Plant and collected lease rent in advance. The Department alleged that the appellant did not pay service tax for leasing the vacant land. The appellant argued that during the disputed period, vacant lands were excluded from the purview of service tax. The appellant started discharging service tax on lease rentals collected towards vacant land from 01.07.2010, after the definition of 'renting of immovable property' was amended. The appellant relied on a judgment by the Hon'ble Allahabad High Court and a decision by the Hon'ble Delhi Tribunal to support their argument that renting of vacant land was not taxable before the amendment with effect from 01.07.2010.

Issue 2: Classification of vacant land under renting of immovable property service:
The Tribunal examined the legislative dynamics of the provision related to taxable services provided by renting of immovable property. Prior to 01.07.2010, vacant land was excluded from the definition of immovable property for the purpose of service tax. The 2010 amendments introduced sub-clause (v) which clarified that vacant land given on lease for construction of a building for furtherance of business or commerce would be taxable. The Tribunal held that renting of vacant land for construction purposes became a taxable service only from 01.07.2010 and not before that date.

Issue 3: Liability for interest and penalties:
The adjudicating authority confirmed the demand for service tax along with interest and imposed penalties on the appellant. However, based on the settled issue that renting of vacant land was not taxable before 01.07.2010, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. The Tribunal also referred to a judgment by the Hon'ble High Court of Allahabad which held that there was no liability to pay service tax for renting of vacant land before 01.07.2010.

In conclusion, the Tribunal ruled in favor of the appellant, stating that renting of vacant land for construction purposes became a taxable service only from 01.07.2010, and not before that date. The demand for service tax, interest, and penalties was not sustainable, and the impugned order was set aside with consequential relief for the appellant.