2017 (11) TMI 1111 - AT - Service Tax

Renting of Immovable Property Service - Department, after audit of the accounts of the appellant, was of the view that the amount received by the appellant towards lease rent will be liable to the payment of service tax under the category of Renting of Immovable Property Service - Held that - the issue is decided in favour of revenue by the Tribunal in the case of M/s. Greater Noida Industrial Development Authority Versus CCE & ST, Noida 2014 (9) TMI 306 - CESTAT NEW DELHI , where it was 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 - demand upheld. Extended period of limitation - Held that - the demand of service tax is to be upheld only for the normal time limitation period - Only for the limited purposes of quantification of the demand falling within the normal time limit, the case is remanded to the adjudicating authority. Appeal allowed - decided partly in favor of appellant.

Summary

Issues: Determination of liability to pay service tax on lease rent received by a Municipal Corporation for long-term lease of shops.

Analysis:
1. Background of the Case: The appellant, a Municipal Corporation, leased out shops on a 99-year lease and received rent. The Department contended that the lease rent is liable to service tax under Renting of Immovable Property Service as per section 65(90a) of the Finance Act, 1994. A show cause notice was issued covering the period 2006-07 to 2010-11, resulting in a demand of service tax of &8377;1,87,78,107 along with interest and penalties.

2. Legal Interpretation: The Tribunal referred to the case of Greater Noida Industrial Development Authority Vs. CCE, where it was established that prior to 1-7-2010, renting of vacant land was outside the purview of taxable service under clause (zzzz) of Section 65(105). The introduction of sub-clause (v) in Explanation 1 from 1-7-2010 expanded the scope of taxable service to include vacant land leased for construction of buildings for business purposes.

3. Decision: The Tribunal held that the demand of service tax is to be upheld only for the normal time limitation period. The appellant's plea of being under a bona fide belief that the lease of vacant land for industrial purposes did not attract service tax was considered, leading to the conclusion that the longer limitation period of 5 years would not be applicable. The Service Tax demand was upheld only for the normal limitation period, and the penalty imposed under Sections 77 and 78 was set aside.

4. Remand and Modification: The Tribunal remanded the case to the adjudicating authority solely for the purpose of quantifying the demand within the normal time limit. The impugned order was modified accordingly, emphasizing the restriction of the demand within the normal time limit.

5. Conclusion: The judgment clarified the liability of a Municipal Corporation to pay service tax on lease rent received for long-term leases, based on the legal interpretation of relevant provisions. The decision provided guidance on the applicability of service tax in cases of leasing vacant land for construction purposes, ensuring a fair and just determination of tax liability.