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TMI Blog2019 (8) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t amount of penalty has been confirmed, under Section 65(105)(zzz) and Section 65(105)(zzb) of Finance Act, 1994 ( Act for short). The appellant have allegedly provided services to M/s Barmer Lignite Mining Company Limited ( BLMCL for short) during the period 2008, 2009 to 2012-13. 2. Briefly stated the facts of the case are that the appellant is Government of Rajasthan Undertaking formed under Companies Act, for development and extracting mines and minerals etc. in the State. Considering the acute power shortage in the State of Rajasthan, a policy decision was taken to set up thermal power plant, with Private Public Participation, and for which a bid was invited for setting up lignite (mining) based thermal power project, at Barmer. The Government of Rajasthan selected M/s Raj West Power Limited ( RWPL for short) for setting up a 1000 MW Thermal Power Plant. The Rajasthan government also decided to allot lignite deposits at Kapurdi and Jalipa mines in Barmer to RWPL. Pursuant to the grant of bid, an Implementation Agreement (IA for short) was signed between Government of Rajasthan (GoR for short) and RWPL on 29.05.2006 for implementation, operation and maintenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of purchase of land was distributed by LAO, by issuing the cheque from the said escrow Account, to the land owners. The following amount was paid by the LAO during the period 2008 to 2012 as indicated herein. Fin. year Amount deposited for Kapurdi Amount deposited for Jalipa Total amount deposited 2008-09 45,00,00,000 - 45,00,00,000 2009-10 222,56,52,000 - 222,56,52,000 2010-11 69,24,772 468,25,54,750 468,94,79,522 2011-12 - 241,00,00,000 241,00,00,000 Total 268,25,76,772 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erlying the surface of the earth. While granting such right, incidental rights over the mining area is also granted as the surface right , which the revenue failed to appreciate and treated that as the primary activities, which in fact was the incidental one. The deposit, which was made to the LAO, was not for the grant of surface right, but was rather for the payment of land acquired from the Khatedar/ cultivator. After the acquisition of land the title of the land vested with the GoR, which is also evident from the mutation records. The mutation record showed the GoR as a land owner, but the same was mutated in favour of JV company for the purpose of conducting the required mining activities. Therefore, the renting of land acquired for mining activities, as has been perceived by the Department, is incorrect appreciation of the legal provision under the Act. It was also submitted that renting of vacant land for mining purposes was specifically excluded from the definition of renting of immovable property services. The Point of Taxation Rules, 2011, specifically mentions that no service tax can be demanded in a situation when the services had been rendered and payment were invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rface right, which is a service to be classified under renting of immovable property service. As the transfer of surface right was reflected in the books of account of BLMCL on 30.12.2012, the transaction is required to be taken only from this date, which is after 1 July, 2012 (after introduction of negative tax regime) and hence taxable. Therefore, the limitation for raising the demand is required to be reckoned from that date, which is 30.12.2012, demand is well within the normal period of limitation. It was also impressed upon that the transaction got completed in September 2012, when Government of Rajasthan issued a clarification that the title of the land would not be transferred to BLMCL or even the same cannot be mortgaged for taking loan from financial institution. This activity got approved on 30.12.2012 in the Board meeting of BLMCL. It is, therefore, his submission that the entire activity of land acquisition, although initially intended for sale, has become service by the subsequent cancellation of transfer of land to the JV company and treating the amount spent towards the grant of surface right. 11. Learned Authorised Representative submits that the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ashok Singh Academy -2010 (17) STR 363 (Tri Del.) 15. We have gone through the submissions made by both the sides and also considered the appeal record. We have also considered the written submission made by both the sides subsequent to the hearing. 16. The issue to be decided in this case is as to,- (i) 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; ii) 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 ; and (iii) Whether deployment of officers in the JV company, would amount to rendition of service under the category of Business Auxiliary Service . 17. As far as the acquisition of land by the appellant is concerned, it is on record that the same has been procured by the GoR and assigned to the appellant. The land was acquired from Khatedari land of GoR or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immovable property. 18. The argument of learned Authorised Representative that the relevant date is the entry of the transaction, in the books of account of JV company, is not correct as the transaction has already been completed and the land has been transferred to the State Government/ JV company, much before 13.12.2012. The record produced before us is amply clear on that issue. Learned Authorised Representative has misunderstood that the land has not been transferred to the State Government, but only mutated in favour of the JV company, is incorrect and also improper appreciation of land records. The sale of the land was completed when the LAO had made the payment to the cultivator. In that situation, there is no question of treating the activities undertaken by the appellant by way of acquisition of land from the land holder, for the project, to be treated as service rendered respectively, so as to charge service tax. This will be entirely contrary to the provisions of the Finance Act. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth; 16. On going through the said definition, the immovable property includes land benefit arising out of land can be equated to transfer of development rights of the land, therefore, it is to be seen in the legal aspect whether the benefit arising out of land can be equated to transfer of development rights of land or not? The said issue has been examined by the Hon ble Allahabad High Court in the case of Bahudur and Others vs. Sikandar and Other wherein the Hon ble Apex Court observed as under:- Therefore, the principal question we have to consider is whether the right to collect dues upon a given piece of land, the property of the alleged lessor, is a benefit to arise out of land within the purview of Section 3 of the Registration Act. In our opinion, the right to collect dues upon a given spot is such a benefit, and therefore, we are constrained to find that the document in question purported to convey that which falls within the definition of immovable property. The so-call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for use of TDR consequently can be specifically enforced, unless it is established that compensation in money would be an adequate relief. Further, the issue was examined by the Hon ble High Court of Bombay again in the case of Shadoday Builders Private Ltd. And Ors. Vs. Jt. Charity Commissioner and Ors (supra) wherein the issue was in respect of sale of transferrable development right is immovable property or not? The Hon ble High Court observed as under:- 5. The principal issue which arose before the learned Joint Charity Commissioner as to whether the TDR could be termed as a movable property, is concluded and is not more res integra in view of the judgment of the Division Bench of this court reported in 2007(3) Mh.L.J. 402 in the matter of Chheda Housing Development Corporation..vs.. Bibijan Shaikh Farid and ors.Para no.15 of the said judgment is material and is reproduced hereunder. 15. The question is whether on account of the term in the clause which permits acquisition of slum TDR the appellants insofar as the additional F.S.I. is concerned, are not entitled for an injunction to that extent. An immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying upon the judgment of the Division Bench in Chheda Housing Development Corporation (supra) has held that the TDR being an immovable property, all the incidents of immovable property would be attached to such an agreement to use TDR. In view of the judgments of this court (supra), in my view, the order of the Charity Commissioner that no permission under Section 36 is required as TDR is a movable property cannot be sustained and therefore, the application filed by the respondent no.2 Trust under Section 36 of the said Act would have to be considered on the touch stone of the principles applicable to such a sale by a trust. As the Hon ble High Court observed in the case of Sadoday Builders Private Ltd. And Ors. (supra) that transferrable development right is immovable property, therefore, the transfer of development rights in the case in hand is termed as immovable property in terms of Section 3(26) of General Clauses Act, 1897 and no service tax is payable as per the exclusion in terms of Section 65B(44) of the Finance Act, 1994 . 19. Similar view has been expressed by the Coordinate Bench of this Tribunal in the case of Mormugao Port Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he renting of the office to the firm. ....... ........ 23. We are accordingly of the view that there is no service that has been rendered by the Appellant. Much less the taxable service of renting of immovable property. The money flow to the Assessee from SWPL, under the nomenclature of Royalty, is not a consideration for rendition of any services but in fact represents the Appellant s share of revenue arising out of the Joint Venture being carried on by the Assessee and SWPL. 24. Since we are allowing the party s appeal on merits the other contention to the aspect to time-bar are not being gone into. The Revenues appeal challenging the non-imposition of penalty does not survive as the demand of service tax itself is not sustainable. Consequently, the party s appeal is allowed and the Revenue s appeal is dismissed. 20. Appeal against this order was dismissed by the Supreme Court. 21. In the circumstances, we find that 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 pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. For such deputed employees, they have got consideration on actual basis reimbursed by the said subsidiary unit. The appellants have recovered cost for such deputation on actual basis without any mark up. We note that the appellant is not engaged in manpower recruitment or supply and are not to be considered as manpower supply agency. Even otherwise, we note that the decision cited and relied upon by the appellant on this issue herein above as well as the decision of the Tribunal in airbus Group India Pvt. Ltd. -2016 (45) STR 120 (Tri. Del.), settles the issue in favour of appellant. We find deputing employees to group company cannot be considered as supply of manpower. The appellants categorically asserted that they continued to control the deputed employees and have only got reimbursement of actual cost for such deputation. We find following the ratio of decided cases mentioned above, the Service tax liability on appellant on this issue cannot be sustained . Similar view has been taken by this Tribunal in the case of Franco Indian Pharmaceutical Pvt. Limited vs. CST, Mumbai - 2016 (42) STR 1057 (Tri. Mum.). The relevant paragraph is as under: 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity. Not only for this reason, but even for the sake of convenience in contracting and accounting, contracts of such joint employment may be signed by only one employer-company and not by all. This, however, cannot make a difference to the taxability or otherwise of the employment contract. No doubt, an employee who signs a contract of employment with one company can legitimately refuse to work for another company, either on deputation or on secondment, if such employment contract is silent on the employer s right to depute or second the employee. However, if such an employee consents to such deputation or secondment to another company and willingly works for other employer-companies for long periods of time, knowing fully well that his emoluments are being paid by such other companies, his contract of employment with a single employer will, by virtue of the parties conduct, transform itself into a contract of joint employment with several employers. In the present case too, employees have been working for many years with several group companies who have, in terms of a pre-existing understanding amongst themselves, been sharing the actual cost of employment on an agreed basis. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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