2018 (7) TMI 705 - AT - Service Tax

Renting of immovable property - Leasing out of water bodies for the purpose of aquaculture and fishing rights - negative list as provided under section 66D of the Finance Act - period between April, 2008 to 30.6.2012 - Held that - The view of the Department that aquaculture and leasing of water bodies are two separate activities and, therefore, leasing of water bodies is not exempted from levy of service tax is certainly not tenable as we find that water bodies can only exists on vacant land and for undertaking aquaculture, the presence of water bodies is absolutely essential and pre-requisite. Leasing of water bodies for fishing purposes is same as leasing of vacant land for aquaculture and therefore, same is fully covered under the exclusion clause of Section 65 of the Finance Act, 1994 and hence not leviable to Service tax. Period between 1.7.2012 to August, 2013 - Held that - Same provisions have continued in slightly modified way wherein the activity of agriculture has been included in the negative list of items under section 66 D of the Finance Act, 1994 and agriculture as defined in clause (3) of the Section 65 B, as the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products - fishing/ aquaculture is part of the broader definition of agriculture and thus exempted from levy of service tax. Agriculture being in the negative list of items under Section 66D of the Finance Act, 1994 is not leviable to service tax and thus for this period also, the service tax is not leviable on leasing of water bodies. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether leasing out water bodies for aquaculture and fishing rights amounts to renting of immovable property under Section 65(90a) of the Finance Act, 1994?
2. Whether water bodies used for aquaculture are excluded from the scope of definition of 'renting of immovable property' for the demand period between April 2008 to June 2012?
3. Whether the activity of aquaculture falls under the negative list of service tax under Section 66D of the Finance Act, 1994 for the period between July 2012 to August 2013?

Analysis:
1. The case involved a dispute where the Department of Fisheries, Government of Rajasthan auctioned water bodies for fishing rights, leading to a demand for service tax under the contention that leasing water bodies for aquaculture amounts to renting of immovable property. The Tribunal analyzed the provisions of Section 65(90a) of the Finance Act, 1994 and the explanations provided therein. The Tribunal held that water bodies leased for aquaculture are excluded from the scope of 'renting of immovable property' as water bodies are essential for aquaculture, which falls under the exclusion clause.

2. For the demand period between April 2008 to June 2012, the Tribunal noted that aquaculture was specifically excluded from the definition of 'renting of immovable property' service. It was emphasized that water bodies are integral to aquaculture and leasing water bodies for fishing is akin to leasing vacant land for aquaculture. Therefore, the Tribunal concluded that leasing water bodies for fishing purposes is covered under the exclusion clause and not liable to service tax.

3. Regarding the period between July 2012 to August 2013, the Tribunal referred to the negative list under Section 66D of the Finance Act, 1994. The definition of agriculture under Section 65B(3) includes aquaculture, which falls under the negative list exempted from service tax. The Tribunal held that since aquaculture is part of agriculture, leasing water bodies for aquaculture during this period is not subject to service tax. Consequently, the impugned order demanding service tax was set aside, and the appeal was allowed in favor of the appellant.