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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 ..... cting 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 maintenance of lignite based thermal power plant with associated facilities based on lignite available in Barmer District. 3. As per the IA, a separate company was to be formed as a Joint Venture unit (JV for short) between the appellant and RWPL, for carrying out lignite mining. The JV company was, therefore, formed by name and style of Barmer Lignite Mining Co. Limited (BLMCL for short), with appellant holding 51% of equity share and remaining 49% of stake w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,00,000 241,00,00,000 Total 268,25,76,772 709,25,54,750 977,51,31,522 4. Due to the various policy decisions taken by the Government of India and GoR, the JV company was not given the title of the land. The Deputy Commissioner, GoR, vide his letter dated 14.09.2012 informed BLMCL, that their request for transfer of 17,323.5 bigha of land of Kapurdi Lignite Project was rejected alongwith Khatedari land. The JV company, BLMCL was also denied the permission to create the mortgage of mining lease in favour of lending institution. BLMCL had unilaterally, in its Board meeting on 13.12.2012, decided to record the payment made towards the acquisition of land, as having been made towards the 'grant of surface right' for Kapurdi and Jalipa land. 5. Pursuant to the investigation conducted by the Service Tax Department, a show cause notice was issued on 19.09.2014 treating the acquired land, as a service under the category of renting of immovable property service, on the alleged consideration of Rs. 989.92 crore for 'transfer of surface right' in favour of BLMCL. The notice further demanded service tax under 'Business Auxiliary Service' (BAS for short) on amount of Rs. 10.2 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me taxable. It was further submitted that even the activities as alleged in the show cause notice and held in impugned order, is treated to be a taxable event then the appellant is required to be treated as pure agent, as no consideration amount has been retained by the appellant nor even any mark up has been done, while distributing the payment made towards the purchase of land by the LAO. 7. Regarding grant of 51% of equity to the appellant in the JV company, that cannot be treated as service, as the appellant had not done any promotion, marketing, sale, etc. for which they were liable to be covered under the BAS. The appellant further submitted that amount recovered from BLMCL towards the deputation of employees and officials on actual basis, cannot be treated as 'service' under the category of BAS. 8. The appellant also pointed out that the demand is barred by limitation as the entire fact was within the knowledge of the Department. It is also a fact that the money was spent towards the acquisition of land by the JV company, however, transfer of land in their name was cancelled by the Government of India and the activity was therefore considered as surface right by the JV co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of BLMCL for year ending 30.03.2012. Even otherwise the definition of taxable service under the renting of immovable property does not require the service provider to the owner of the land. 12. Learned Authorised Representative also drawn attention towards Rule 3 and Rule 5 of POTR, 2012. The point of taxation for this transaction before 01.07.2012, when the renting of vacant land solely used for mining purpose, was excluded from the definition of taxable service. It was submitted that Rule 5 of POTR, 2011, is applicable for payment of tax in case of new services which are taxed for first time. As the services in question was introduced in year 2007 itself, and hence Rule 5 was not to be applied. 13. Even otherwise, it was stated by learned Authorised Representative that the sub category of renting of vacant land solely for mining purposes, became taxable w.e.f. 01.07.2012 (with introduction of negative list), then also Rule 5 was not applicable as the said transaction has materialised in December, 2012 only. He, therefore, submitted that the POTR rule, which is applicable in this case, is Rule 3 only, which is the date of making adjustment in the account, by reflecting such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses; As per the definition contained in 2(d) "mining operation" means any operation undertaken for the purpose of winning any mineral; As per Section 27 of the Act the mining lease shall be subjected to various conditions and sub-section (d) defines as under: "(d) the lessee shall also pay, for the 'surface area' used by him for the purposes of mining operations, 'surface rent' and water rate at such rate, not exceeding the land revenue, water and cesses assessable on the land, as may be specified by the State Government". From the definition, it is clear that the surface right, which Revenue is contemplating as service, emerges out from the activity of mining operation, as incidental activity. The main activity remains the mining activity, which is nothing but benefit arising out of the land. Therefore, the same cannot be held to be the service per se. It is also on record that initially appellant has only acquired the land for purpose of making it available to the JV company, for the setting up of the power plant to meet acute shortage thereof in the remote area of State of Rajasthan, in the Barmer District. The entire amount of Rs. 989.92 crore spent on the acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Revenue has also failed to find out the actual value for the alleged services rendered for grant of surface right, even though not acceptable, to us in view of our findings as mentioned above. In this regard, we find that the identical issue has come up for consideration though in different context regarding sale of 'developmental right' in case of DLF Commercial Project vs. Commissioner of Service Tax, Gurgaon-2019-TIOL-1514-CESTAT, CHD, wherein it has been held that the development right is benefit arising out of land and therefore, the same is not chargeable to service tax. The relevant paragraphs of the decision are extracted as under:- "14. Now, we deal with the legal aspect of the case. Section 65B(44) of the Finance Act, 1994 defines the services and excluded certain activities which are as under:- any activity which constitutes merely- (i) a transfer of title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants in so far as the additional FSI is concerned, are not entitled for an injunction to that extent. An immovable property under the General Clauses Act, 1897 under Section 3(26) has been defined as under:- (26) "immovable 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." If, therefore, any benefit arises out of the land, then it is immovable peruperty. Considering Section 10 of the Specific Relief Act, such a benefit can be specifically enforced unless the respondents establish the compensation in money would be an adequate relief. Can FSI/TDR be said to be a benefit arising from the land. Before answering that issue we may refer to some judgments for that purpose. In Sikandar and Ors. Vs. Bahadur and Ors. 27 ILR 462 a Division Bench of the Allahabad High Court held that right to collect market dues upon a given piece of land is a benefit arising out of land within the meaning of Section 3 of the India Registration Act, 1877. A lease, therefore, of such right for a period of more than one year must be made by resitered instrument. A Division Bench of the Oudh High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar and ors..vs. Bahadur and ors., XXVII Indian Law Reporter, 462, a Division Bench of the Allahabad High Court Held that right to collect market dues upon a given piece of land is a benefit arising out of land within the meaning of section 3 of the Indian Registration Act, 1877. A lease, therefore, of such right for a period of more than one year must be made by registered instrument. A Division Bench of the Oudh High Court in Ram Jiawan and anr..vs. Hanuman Prasad and ors., AIR 1940 Oudh 409 also held, that bazaar dues, constitute a benefit arising out of the land and therefore a lease of bazaar dues is a lease of immovable property. A similar view has been taken by another division Bench of the Allahabad High Court in Smt. Dropadi Devi vs. Ram Das and ors., AIR 1974 Allahabad 473 on a consideration of section 3(26) of General Clauses Act. From these judgments what appears is that a benefit arising from the land is immovable property. FSI/TDR being a benefit arising from the land, consequently must be held to be immovable property and an Agreement for use of TDR consequently can be specifically enforced, unless it is established that compensation in money would be an adequate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractors and such a relationship is governed by a separate contract independent of the partnership/ joint venture agreement. To illustrate, a partner in a partnership firm may enter into a separate lease agreement with the firm for renting out his private property to the Partnership firm for a monthly rent in this situation, the partner will be liable to pay service tax on the renting service rendered by him to the firm. On the other hand, if the partner chooses to grant the firm a right to use his office premises and regards this as his contribution to the hotch-potch of the partnership firm, the reward by way of profits which such partner may earn upon the success of the partnership venture will not be taxable as the profit earned by the partner in such circumstances is not a consideration for the service of renting out the property to the partnership firm. By placing the office at the disposal of the firm to conduct is business the partner agrees to receive only a share of profit which is contingent upon the firm earning profits in the first place. If the venture fails and the firm does not earn any profit, the partner may not receive anything in return for the contribution made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. On merit, also we find that similar issue regarding the 'royalty' to be treated as value for the purpose of renting of immovable property services in case of Mormugao Port Trust v. Commissioner -2017 (48) STR 69 (Tri. Mum.) wherein it is held that amount received as royalty was not consideration for rendition of any services including renting/ leasing land and waterfront but in fact was the assessee's share of revenue arising out of joint venture between assessee and SWPL and thus, was not liable to Service Tax. The appeal against this order, the Hon'ble Supreme Court in case of Commissioner v. Mormugao Port Trust -2018 (19) GSTL J118 (S.C.) dismissed the appeal filed by the Department on the ground of delay as well as on merits. 23. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by one or more employers who normally share the cost of such employment. The services provided by such employee will be covered by the exclusion provided in the definition of service. However, if the staff has been engaged by one employer and only made available to other for a consideration, it shall not be a case of joint employment. 6. Another arrangement could be where one entity pays the salary and other expenses of the staff on behalf of other joint employers which are later (sic) from the other employers on an agreed basis on actual. Such recoveries will not be liable to service tax as it is merely a case of cost reimbursement." 7.1 We find that in the present case, the revenue would have had no objection if the contract of employment with the employees had been signed jointly by all the employer-companies, and if these employer-companies were paying their respective share of salary to the employees directly. The problem in the present case has arisen only because instead of the employer companies signing the appointment letter jointly, only one of them has signed the same and then shown the employees as lent or deputed to other companies for their work. The reason for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of consideration for any service, but will merely represent reimbursement of shared costs." 24. In view of the above, the deputation of the employee to the JV company cannot be held to be service. Thus service tax is to be charged. 25. We also find 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. We also find that 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. Therefore, 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. We also find that there is no intent to evade payment of duty, which is sine qua non for invoking proviso under Section 73A of the Act, not apparent from record. In such circumstances, we also hold that the demand is time barred. 26. Accordingly, we set aside the impugned order and allow the appeal with c ..... 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