2019 (8) TMI 386 - AT - Service Tax

Renting of immovable property service or not - long term lease over 30 years - ownership remains with the government - transaction of grant of right in leasehold property - service or not - non-payment of service tax - period 1.06.2007 to 31.03.2012 and period 01.04.2012 to 31.03.2013 - Agreement to Lease - Cum Tax benefit - extended period of limitation - difference of opinion. HELD THAT - Both Member (Technical) and Member (Judicial) recorded different opinion on the issue

Issues Involved:
1. Service Tax on lease of vacant land.
2. Service Tax on lease premium.
3. Definition of service under Section 65B(44) of Finance Act, 1994 post 1st July 2012.
4. Qualification of appellant as a government authority for exemption.
5. Invocation of extended period of limitation.
6. Liability to pay interest on unpaid service tax.
7. Imposition of penalties under Sections 76, 77, and 78.
8. Levy of Service Tax on plots leased for residential use and hotels.

Issue-wise Analysis:

1. Service Tax on Lease of Vacant Land:
The tribunal held that as per Section 65(105)(zzzz) of the Finance Act, 1994, Service Tax is applicable on the lease of vacant land given for construction of buildings or temporary structures for business or commerce purposes, effective from 1st June 2007. This conclusion is based on the retrospective amendment validated by Section 77 of the Finance Act, 2010.

2. Service Tax on Lease Premium:
The tribunal concluded that lease premium received by the appellant is part of the taxable value under "Renting of Immovable Property." This is supported by Section 67 of the Finance Act, 1994, which includes any amount received towards the taxable service before, during, or after the provision of such service. The decision aligns with the Tripura High Court's ruling in Hobbs Brewers India Pvt Ltd [2016 (45) STR 60 (Tripura)].

3. Definition of Service under Section 65B(44) of Finance Act, 1994 Post 1st July 2012:
The tribunal found that leasing of immovable property does not constitute a transfer of title in immovable property and thus falls within the definition of "service" under Section 65B(44). The activity is also a declared service as per Section 66E of the Finance Act, 1994.

4. Qualification of Appellant as a Government Authority for Exemption:
The tribunal held that the appellant does not qualify as a "governmental authority" under Notification No. 25/2012-ST. The appellant, being an agent of the state government declared under Section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966, does not meet the criteria set by the notification. The distinction between Development Authorities constituted under sub-section 2 and state agents declared under sub-section 3A of Section 113 was emphasized.

5. Invocation of Extended Period of Limitation:
The tribunal upheld the invocation of the extended period of limitation, stating that the appellant had suppressed material facts and failed to disclose relevant information to the department. The appellant's actions justified the invocation of the extended period under Section 73 of the Finance Act, 1994.

6. Liability to Pay Interest on Unpaid Service Tax:
The tribunal confirmed the liability to pay interest on the unpaid service tax under Section 75 of the Finance Act, 1994. The interest is for the delay in payment of tax from the due date, as supported by various judicial precedents.

7. Imposition of Penalties under Sections 76, 77, and 78:
Penalties under Sections 76, 77, and 78 were upheld. The tribunal noted that penalties under Section 76 and 78 can be imposed simultaneously for the period up to 10th May 2008. Penalties under Section 77 were justified for the failure to file ST-3 returns. The imposition of penalties was supported by judicial precedents emphasizing the civil nature of these penalties.

8. Levy of Service Tax on Plots Leased for Residential Use and Hotels:
The tribunal remanded the matter back to the adjudicating authority to consider the claims regarding plots leased for residential use and hotels. The appellants provided details at the appeal stage, and the tribunal directed the adjudicating authority to re-examine these claims and re-quantify the demands accordingly.

Conclusion:
The appeals were dismissed except for the remand on the issue of plots leased for residential use and hotels. The adjudicating authority was directed to re-determine penalties under Section 78, considering the complexity of legal issues and the standing of the appellant. The matter was to be decided within four months from the date of receipt of the order. Appeals against the demand notice were dismissed as infructuous.

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