2014 (1) TMI 1203 - AT - Service Tax

Demand of service tax - Imposition of equivalent penalty u/s 78 - Renting of immovable property - Whether long term leases of immovable property are outside the purview of the taxable service enumerated and defined in Section 65(105) (zzzz) - Held that - On a true and fair construction of this provision it is clear that a service provided in relation to renting of immovable property for use in the course of or in furtherance of business or commerce is the taxable service. The provision does not restrict the ambit of the taxable service to only short term leases nor identifies or classifies leases in terms of the duration. A lease is defined in Section 105 of the Transfer of Property Act, 1882, as transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crop, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. In the absence of any restrictive signification in Section 65 (105)(zzzz), of a legislative intent to exclude long term leases of immovable property from the purview of the taxable service defined and enumerated in said provision, we find no authority to hold that long term leases (so-called) are outside the purview of the taxable service. Renting of vacant land - Held that - 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. Since the show cause notice did not specifically demand nor the assessee care to furnish details and particulars of the lease transactions and of the several categories of receipts, in respect of vacant lands leased by it for business or commercial purposes; nor had asserted in defence, which of the leases were not in furtherance of business or commerce; and since the adjudicating authority also did not, in the circumstances, advert to this aspect of the matter, we are not inclined to go into the contention (urged in oral arguments) that part of the lease transactions were for furtherance of purposes other than business or commerce. If any such transactions of the appellant/assessee are in respect of leases for non-commercial or non-business purposes, since we are remitting the matter, the Authority shall consider this aspect of the matter. The appellant may submit clear and a categorical pleadings, by way of detailed written submissions, coupled with the relevant transactional documents in support of any assertion, that some of its leases were in respect of non-business or non-commercial purposes. Appellant is seen to have inadequately and incoherently pleaded its defence and claims for exclusion of some of its receipts, from the ambit of the gross consideration received from the taxable renting of immovable property transactions/leases; such as industrial or commercial penalty; industrial or commercial forfeiture, building plan fee, advertisement charges, interest on lease rent etc; on the ground that these are not legitimate components of considerations received for the taxable renting of immovable property service - adjudication order is quashed and matter remitted to the said authority for passing a fresh adjudication order, commencing from the stage subsequent to the show cause notice - Decided in favour of assessee.

Issues Involved:
1. Taxability of long-term leases of immovable property.
2. Taxability of renting vacant land prior to 1.7.2010.
3. Invocation of the extended period of limitation.
4. Exclusion of certain receipts from the gross consideration for taxable service.
5. Conduct of the appellant in cooperating with the Service Tax Department.

Detailed Analysis:

1. Taxability of Long-Term Leases of Immovable Property:
The Tribunal addressed whether long-term leases fall outside the purview of the taxable service defined in Section 65(105)(zzzz). The judgment clarified that the provision does not distinguish between long-term and short-term leases. It was emphasized that a lease, as defined in Section 105 of the Transfer of Property Act, 1882, involves the transfer of a right to enjoy property for a specified period in consideration of a price. The Tribunal concluded that long-term leases are included within the taxable service of "renting of immovable property," rejecting the appellant's contention that long-term leases should be excluded.

2. Taxability of Renting Vacant Land Prior to 1.7.2010:
The Tribunal examined whether renting vacant land for business or commercial purposes was taxable before the introduction of clause (v) in Explanation (1) to Section 65(105)(zzzz) on 1.7.2010. It was noted that prior to this amendment, the exclusionary clause in the provision explicitly excluded vacant land from the definition of "immovable property." Consequently, renting of vacant land was not considered a taxable service before 1.7.2010. The introduction of clause (v) expanded the scope of the taxable service to include vacant land given on lease for construction purposes, effective from 1.7.2010.

3. Invocation of the Extended Period of Limitation:
The Tribunal did not make a definitive ruling on the validity of invoking the extended period of limitation due to the remand of the case for fresh adjudication. The appellant was allowed to assert its claims regarding the limitation period during the remanded proceedings, and the adjudicating authority was directed to consider these claims and provide a ruling.

4. Exclusion of Certain Receipts from the Gross Consideration for Taxable Service:
The Tribunal noted that the appellant had inadequately pleaded its defense regarding the exclusion of certain receipts (such as penalties, forfeitures, building plan fees, advertisement charges, interest on lease rent) from the gross consideration for the taxable service. The case was remanded to allow the appellant to furnish detailed written submissions and supporting documents to substantiate claims for exclusion. The adjudicating authority was instructed to consider these claims and provide a reasoned conclusion on which aspects of the consideration are attributable to the taxable service.

5. Conduct of the Appellant in Cooperating with the Service Tax Department:
The Tribunal expressed strong disapproval of the appellant's conduct in failing to cooperate with the Service Tax Department by not responding promptly to notices and summons and not furnishing requisite records. The Tribunal emphasized that the appellant, as an assessee, must comply with the law and cannot assume immunity from legal processes. The appellant was urged to conduct itself with greater fidelity to the mandate of law in future assessment proceedings.

Conclusion:
The adjudication order dated 26.2.2013 was quashed, and the matter was remitted to the adjudicating authority for fresh adjudication, starting from the stage subsequent to the show cause notice dated 19.10.2012. The appellant was given 30 days to submit a written response with supporting documents. The adjudicating authority was directed to pass a fresh order in accordance with the law, with the liberty to proceed ex-parte if the appellant remained unresponsive. No order as to costs was made.

← Previous Next →