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2019 (8) TMI 913 - AT - Service TaxBusiness Auxiliary services - services to M/s Barmer Lignite Mining Company Limited - period 2008, 2009 to 2012-13 - acquisition of land made by the appellant for setting up of the thermal power plant - denial of permission of transfer of land - lease of mines - Point of taxation rules - deployment of officers in the JV company - time limitation. Whether the acquisition of land made by the appellant for setting up of the thermal power plant by the JV company as per the agreement entered with RWPL is to be considered as service after the denial of permission of transfer of land, acquired by the JV company? - HELD THAT - The provisions of Mines and Minerals Act, clearly states that the element of surface right is not the main activity in the mining operation, but it is only incidental to that. In such a situation, the incidental activity cannot be treated as a main activity, which is mining and benefit arising out of law, to be an independent service under the category of renting of immovable property service. Even if it is presumed that surface right is activity which could be construed as renting of immovable property, the entire sale consideration could not be treated towards the value of service provided by the appellant. The Revenue has not taken pain to segregate as to what is the value of the service component involved in the transaction. The treatment of entire amount that has been spent towards the acquisition of land, by no stretch of imagination, can be treated as value towards the alleged service - There is no element of service involved in the transaction, undertaken by the appellant while acquiring the land and transferring the same to the JV company, for setting up of the power plant. Whether the 51% equity stake which has been granted to the appellant by the Implementation Agreement, in the JV company, could be treated as Business Auxiliary Service - HELD THAT - The Commissioner has not given any category under this it is to be treated as service. We find that the activity of grant of 51% share in JV is not covered in any of the sub heading under the Business Auxiliary Service , as defined in Section 65(105) of the Finance Act. It is also not clear from the impugned order or from the submission made by the learned Authorised Representative as to whether this grant of equity to the appellant will be covered under definition of the BAS, under the Act. Even by assuming that the grant of 51% of equity is considered as consideration, for rending of service, the same was granted in year, 2008-09, while the notice has been issued on 18.03.2015, this is even beyond the limit of five years, therefore, the show cause notice could not have been issued on this count. The demand is, therefore, not sustainable. Whether deployment of officers in the JV company, would amount to rendition of service under the category of Business Auxiliary Service - HELD THAT - Regarding the expenses recovered by the appellant on actual basis from BLMCL, the JV company, towards deputation of their employee and related expenses, cannot be categorised under the BAS. Even otherwise the deputation of employee in the JV company cannot be treated as BAS - the deputation of the employee to the JV company cannot be held to be service. Thus no service tax is to be charged. Time Limitation - HELD THAT - The entire activity of acquiring of the land by the appellant, on behalf of the JV company, was known to the Department before issue of the show cause notice. Also the entire issue of non transfer of land by the appellant to the JV company, was taken by the Government of India and by the State of Rajasthan, subsequent to the acquisition of land, can be considered only as a change of opinion in the subsequent periods - there is no case of suppression of facts, so as to invoke larger period of limitation, for raising the demand, is not available to the Department and thus the demand is not sustainable - demand is time barred. Appeal allowed.
Issues Involved:
1. Whether the acquisition of land by the appellant for setting up a thermal power plant by the JV company constitutes a taxable service after the denial of permission for the transfer of land. 2. Whether the 51% equity stake granted to the appellant in the JV company can be treated as 'Business Auxiliary Service' (BAS). 3. Whether the deployment of officers in the JV company amounts to rendering service under the category of 'Business Auxiliary Service'. Issue 1: Acquisition of Land and Renting of Immovable Property Service The appellant, a Government of Rajasthan Undertaking, acquired land for setting up a thermal power plant through a JV company, BLMCL. The land was acquired from landholders and the Government, with payments made from an escrow account funded by RWPL. The Service Tax Department issued a show cause notice treating the acquired land as a service under the category of renting of immovable property service, demanding service tax on the alleged consideration of ?989.92 crore for the 'transfer of surface right' in favor of BLMCL. The appellant argued that there was no renting of immovable property as they were only a lessee under a mining lease granted by the GoR, which was assigned to BLMCL. The assignment lease was not a sub-lease or license but a simple assignment deed. The right of mining lease included incidental rights over the mining area, which the revenue misinterpreted as the primary activity. The deposit made to the LAO was for the payment of land acquired from the cultivators, not for the grant of surface right. The mutation records showed the GoR as the landowner, and the land was mutated in favor of the JV company for mining activities. The Tribunal held that the acquisition of land by the appellant was not a service but an incidental activity to mining operations. The sale of land was completed when the LAO made payments to the cultivators, and the subsequent denial of mutation did not retrospectively convert the sale into a service. The entire amount spent on land acquisition could not be treated as the value of the alleged service. The Tribunal cited several decisions, including the case of DLF Commercial Project vs. Commissioner of Service Tax, Gurgaon, where it was held that developmental rights are benefits arising out of land and not chargeable to service tax. Issue 2: 51% Equity Stake and Business Auxiliary Service The show cause notice also demanded service tax on the 51% equity stake granted to the appellant in the JV company, treating it as a service under BAS. The appellant argued that the grant of equity could not be treated as a service as they did not engage in promotion, marketing, or sales activities. The Tribunal found that the grant of 51% equity was not covered under any subheading of BAS as defined in Section 65(105) of the Finance Act. Even if considered as a service, the equity was granted in 2008-09, and the notice was issued in 2015, beyond the five-year limit. The demand was not sustainable on merit or limitation. The Tribunal referenced the case of Mormugao Port Trust v. Commissioner, where it was held that royalties received were not consideration for services but the assessee's share of revenue from a joint venture. Issue 3: Deployment of Officers and Business Auxiliary Service The show cause notice also demanded service tax on the amount recovered from BLMCL for the deputation of employees, treating it as a service under BAS. The appellant argued that the deputation of employees and related expenses on an actual basis could not be treated as a service. The Tribunal held that the deputation of employees to the JV company could not be categorized under BAS. The reimbursement of actual costs without any markup did not constitute a service. The Tribunal cited the case of Punj Llyod Ltd. Vs. CST, Delhi, where it was held that deputing employees to a group company could not be considered as supply of manpower. The Tribunal also referenced the case of Franco Indian Pharmaceutical Pvt. Limited vs. CST, Mumbai, where it was held that joint employment and cost reimbursement did not constitute a taxable service. Limitation and Suppression of Facts The appellant also argued that the demand was barred by limitation as the entire transaction was within the knowledge of the Department. The Tribunal found that the entire activity of land acquisition was known to the Department before the issuance of the show cause notice. The subsequent denial of land transfer was due to a change in government policy and did not constitute suppression of facts. There was no intent to evade payment of duty, and the demand was time-barred. Conclusion The Tribunal set aside the impugned order and allowed the appeal with consequential relief, holding that there was no element of service in the acquisition of land, the grant of 51% equity stake, or the deputation of employees. The demand for service tax was not sustainable on merit or limitation.
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