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TMI Blog2017 (5) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant involving identical set of facts and covering the dispute of service tax liability on various charges collected by the appellant from the allottees of land. All these appeals are taken up together for disposal. 2. Briefly stated, the appellants are a company incorporated by the Government of Rajasthan under Companies Act, 1956. They are promoted and fully subscribed by the Government of Rajasthan and are engaged in development of industrial areas, export promotion parks, growth centres, SEZ etc. The appellant are registered with Service Tax department under the category of 'Management, Maintenance and Repair Service' and 'Renting of Immovable Property Service'. The dispute in the present set of appeals mainly revolves around the various charges collected by the appellant from the allottees of land. For the development of industrial areas, Government of Rajasthan allots vacant land on 99 years long term lease to the appellant in terms of Rajasthan Industrial Areas Allotment Rules, 1959 issued under Rajasthan Land Revenue Act, 1956. Such land is further allotted by the appellant to various allottees against payment of 'Development Charges/Allotment Rate/Cost of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the findings of the lower authorities on the liability of the appellant for service tax. He submitted that out of various charges collected by the appellant on which service tax liability has been confirmed, the most significant amount is relating to development charges/value of land received as lump sum premium (salami) amount. More than 90% (Rs. 183 crores) of the service tax demand relates to these charges. The main submissions of the learned Counsel can be summarized as below :- (a) the land in State of Rajasthan is "lease hold land". Allotment is made to the appellant by the Government and the appellant in turn allots the land to various persons. The land allotment by the appellant constitutes 'sale'. The allotment of land/plot by the appellant cannot be treated akin to renting/leasing of immovable property because, in true sense, it is virtually a sale and cannot be treated as a normal renting or leasing for service tax purpose ; (b) the premium/salami received by the appellant as development charges is nothing but price paid for obtaining the lease. It precedes the grant of lease and as such cannot be equated with rent which is paid periodically. A reference was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be taxed under the category 'Real Estate Agent Service'. They are not acting as agent between the buyer and seller of land. The charges are for taking note of the change in the lessee and administrative expense thereto. This record is maintained as part of 'municipal function'. (f) the demand wherever made invoking extended period is not tenable. The appellant is a Government authority who cannot be attributed with malafide motive to evade payment of service tax. They were duly registered with the Department and were discharging service tax wherever applicable, regularly. On the same ground penalties cannot be imposed on the appellant. The issues involved were of legal interpretation and the appellant being a Government authority entertained a bonafide belief on their non-liability to service tax on various charges, discussed above. 6. The learned AR strongly contested the submissions made on behalf of the appellant. To begin with, it is submitted that the appellants are a body corporate registered as a company and, as such, cannot be equated to Government. The main dispute involved in these appeals is with reference to service tax liability of the appellant on the lump sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith reference to various types of incomes has no direct relevance while considering the provisions of Section 67 of the Finance Act, 1994. The provisions of Income Tax Act are having specific scope, purpose and intend, as decided by the legislature. The same cannot be referred to for deciding taxable value with reference to service tax which is entirely on a different footing. Section 67 does not provide for such split up of consideration for service. In fact, the Government provided for partial exemption of consideration received, in long term lease arrangement, by issuing Notification No.41/2016-ST dated 22/09/2016. The said notification exempts service tax leviable on one time upfront amount (called as premium, salami, cost, price, development charges or by other name) payable for such lease. As such, it is clear that prior to 22/09/2016 the said amount is liable to service tax. 8. The learned AR further elaborated on the concept of 'virtual sale' or 'deemed sale' of the land claimed by the appellant. He submitted that there is no concept of "deemed sale", recognized by the Finance Act, 1994. A land is sold or not sold. There cannot be a concept of quasi-sale. Even if such conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief to the appellant in respect of one time upfront payment received for leasing out of industrial plot for more than 30 years. On tax liability of economic rent and other charges received by the appellant, he reiterated his earlier submission in support of the findings by the lower authorities. 13. We have heard both the sides and perused the appeal records, written submissions and various case laws referred to. The appellant is a company incorporated with the object of increasing the industrialization in the State of Rajasthan. One of their main activity is to allot and transfer vacant land to entrepreneurs for setting up of industrial units and allied purposes. The appellant is free to devise its own plan for industrial development, earmarking industrial vacant lands and further allotting the same for industrial and allied purposes. The terms and conditions under the scheme are notified by the appellant. The appellants allotted different plots to entrepreneurs and others for the stated purpose. The appellants recovered development charges and economic rent for such allotted land. We have perused the provisions of Rajasthan State Industrial Development and Investment Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for furtherance of business or commerce;] but does not include - (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2. - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;" Section 65B (44) w.e.f. 01/07/2012 : "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]]" 15. Admittedly, substantial part of the demand against the appellant in various proceedings, relate to their service tax liability on lump-sum premium amount, received by them from the allottees on allotment of land on long term basis. In view of the introduction of new Section 104 in the Finance Act, 1994 the appellant's liability on such consideration no longer exists. The one time payment received for grant of long term lease of 30 years or more of industrial plot, is not liable to service tax for all the periods covered in the present proceedings. However, we hold that the appellants are liable to pay service tax in respect of such one time amounts received in respect of lease granted for less than 30 years. We do not find any justificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iodically, on the lands allotted for industrial purpose for the period post 01/07/2010. 18. The appellants also received various other considerations, under different names. Retention charges are collected from the allottees of the land who failed to construct the building or commence commercial production within the specified period mentioned in the land allotment agreement/letter. Restoration charges are collected from allottees who failed to start the production within the prescribed time or committed any breach of condition of lease or allotment, which may entail cancellation of allotment. However, on an application from allottee for restoration of the allotment of the plot, the appellants restore the plot to the original allottee in terms of Rule 24 (3) of RIICO Rules, by collecting restoration charges. Similarly, the appellants also collected charges with reference to unauthorized construction and regularization from the allottees in terms of the said rules. 19. The appellants pleaded that these charges are in the nature of "penal charges" and are not relatable to any consideration for providing taxable service. We are not in agreement with the said submission. We note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t repair and maintenance of roads is exempted from payment of service tax in terms of Section 97 of the Finance Act, 1994. The said exemption has been made applicable from 16/06/2005 upto 26/07/2009. Thereafter exemption Notification 24/2009-ST dated 27/07/2009 and Notification No.54/2010-ST dated 21/12/2010 are applicable. We agree with the contention of the appellant on this issue. Wherever any charges are collected by the appellants towards repair and maintenance of roads, the same shall not be liable to service tax under the category of management, maintenance and repair service. 22. However, regarding other services rendered by the appellant to the allottees in the industrial areas, we find no exemption is available. The claim of the appellant that they have undertaken the said maintenance as a governmental authority and, hence, not liable to tax, is not tenable. The appellant is a corporate company, allotting industrial plots for commercial purpose. As a part of the arrangement of developing industrial areas, they have undertaken certain maintenance works in these industrial areas, which is in furtherance of commercial activity. There is no exemption available for such servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r exemption from service tax in respect of functions entrusted to them in terms of Article 243W of the constitution w.e.f. 30/01/2014. We note that the 12th Schedule of the Constitution specifies fire services/public amenities including street lightings, parking lights, public convenience etc. as the nature of services to be provided by the municipalities. As such we hold that appellant are liable service tax for the period prior to 30/01/2004 as no exemption is available to them. 23. The appellants were also receiving transfer charges as per Rule 18 of RIICO Rules. The transfer of plot is subject to payment of transfer fee. These transfers from one allottee to another or due to change in composition of the allottee, are permitted by the appellant. The Revenue demanded service tax on such charges either under 'real estate agent service' or under 'renting of immovable property service'. We note that the said charges cannot be subjected to service tax liability under the category of real estate agent service. Section 65 (88) states that "real estate agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real agent and incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant with an intention to evade payment of service tax. In fact, substantial service tax liability of the appellant [and similarly placed Industrial Development Corporations of the States] has been exempted by a special legislative provision, introduced in Finance Act, 2017 but made effective from 01/06/2007. As such, we find the demands for extended period are not sustainable against the appellant. On the same reasoning we hold that the penalties imposed on the appellant are also liable to be set aside. 25. The appellants claimed benefit of calculation of service tax by applying the provision of Section 67 (2) of the Finance Act, 1994. Section 67 (2) stipulates as below :- "Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged". 26. Subject to production of evidence that the appellants have charged gross amount which is inclusive of service tax and the arrangement with the service recipient/the documents support such assertion, we hold the appellant should be all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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