2022 (2) TMI 60 - AT - Service Tax

Levy of Service Tax - amount received by the appellant prior to 1.7.2010 as rent for leasing vacant land - period from 5.8.2008 to 20.1.2010 - Department has relied on Notification No. 36/2010-ST to allege that the amount received by them are mere advances and that the said consideration has to be apportioned to future period after 1.7.2010 when the activity of leasing vacant land has become taxable - HELD THAT - The view taken by the department is entirely erroneous. When the activity of leasing of vacant land has become taxable only with effect from 1.7.2010, the amount received by the appellant for such activity prior to 1.7.2010 cannot be subject to levy of service tax even though the lease may extend after the period 1.7.2010. If the appellant received any amount for such lease after 1.7.2010 it may be taxable. However, in the present case, there is no allegation that the appellant has received any rent / consideration after 1.7.2010. This being so, the demand cannot sustain. The issue stands covered by the decision of the Hon'ble High Court of Allahabad in the case of COMMISSIONER OF SERVICE TAX, NOIDA VERSUS M/S GREATER NOIDA DEVELOPMENT AUTHORITY, GREATER NOIDA 2015 (10) TMI 296 - ALLAHABAD HIGH COURT 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. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on amount received prior to 1.7.2010 for leasing vacant land.

Analysis:
The judgment concerns the liability of an appellant to pay service tax on the amount received before 1.7.2010 for leasing vacant land. The appellant had leased their land for 99 years to three customers and collected rent during the period from 5.8.2008 to 20.1.2010. The issue arose as the activity of leasing vacant land became taxable from 1.7.2010 due to an amendment in the definition of immovable property under section 65(105)(zzzz). The department contended that advances received for taxable services before 1.7.2010 were subject to service tax, relying on Notification No. 36/2010-ST. Show Cause Notices were issued, and the original authority confirmed the demand, interest, and penalties, which were upheld by the Commissioner (Appeals), leading to the appeal.

The appellant argued that since the activity of leasing vacant land became taxable only from 1.7.2010, the demand for service tax on amounts received before this date was unjustified. They cited a decision of the Hon'ble High Court of Allahabad in a similar case to support their position. The Tribunal examined the contentions of both sides and analyzed the legal provisions and precedents. It noted that the department's view, based on Notification No. 36/2010-ST, was erroneous. The Tribunal emphasized that if the appellant received any rent after 1.7.2010, it might be taxable, but in this case, there was no such allegation. Therefore, the demand for service tax on amounts received before 1.7.2010 was deemed unsustainable.

The Tribunal further referred to the decision of the Hon'ble High Court of Allahabad in the case of Greater Noida Industrial Development Authority, which clarified the scope of taxable services related to leasing vacant land. Additionally, the Tribunal cited a similar decision involving Tuticorin Port Trust to support its conclusion. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any. The judgment was pronounced on 31.1.2022 by the Appellate Tribunal CESTAT Chennai, consisting of Ms. Sulekha Beevi C.S., Member (Judicial), and Shri P. Anjani Kumar, Member (Technical).