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TMI Blog2022 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax authorities. The main waste generated in the steel plant is blast furnace slag which can be used to manufacture cement. The appellant entered into an agreement with M/s Jai Prakash Associates and formed a joint venture company in the name of M/s Bhilai JVC Cement Limited [BJCL] to manufacture cement. The appellant entered into a long term lease deed with BJCL leasing 34.59 acres of open land for a 30 year period on payment of one time non-refundable premium and an annual rent. The appellant also gave on licence some buildings to BJCL to use as office. For this purpose the appellant entered into the following agreements with BJCL; (i) Long term of lease land deed executed at Bhilai on 05.06.2007 leasing 34.59 acres of land; (ii) Supplementary lease deed on 23.11.2007 which modified the locations of the leased land without altering the total area leased so as to facilitate construction of a railway siding required by BJCL; (iii) A licence agreement dated 23.11.2007 for providing buildings on temporary basis for office use of BJCL. 3. The appellant has been paying service tax under head of 'Renting of Immovable Property Service' on the rent received for the buildings prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herance of, business or commerce. Explanation 1.-for the purpose of this sub-clause, "immovable property" includes- (i) Building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate; (v) vacant land given or license for construction of building or temporary structure at a later stage to be 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 education, sports circus, entertainment and parking purpose; 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2007, the supplementary lease deed dated 23.11.2007 and the licence agreement dated 23.11.2007 and thereby concluding that: (i) the land has been used by the BJCL to set up plant in split locations and, therefore, the land was not a single piece of land but had split locations; and (ii) that there were buildings or structures on the land. (b) The lease of vacant land by the appellant up to 01.07.2010 does not fall under the head of "Renting of Immovable Property Service" as can be seen from the definition of Section 65 (105) (zzzz). (c) The entire exercise is Revenue neutral because if the appellant had paid service tax, BJCL would have been able to enjoy CENVAT credit on the same. (d) No interest is chargeable and no demand is imposable. (e) The computation of service tax is incorrect in service tax is held to be payable because of cum service tax benefit was not given to the appellant. 9. Learned Counsel for the appellant took us through various clauses of the lease agreements and submitted that the fact is that it only leased vacant land which fell under various khasra numbers by the lease deed dated 05.06.2007. The parcels of land leased were modified without alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period 01.06.2007 to 31.03.2012. The show cause notice was issued on 04.06.2012. The appellant is not disputing the liability of service tax with effect from 01.07.2010 and has already paid the service tax so payable for this period. It is only contesting the penalties imposed under section 76, 77 and 78 for this period. For the period prior to 01.07.2010, it is also contesting the demand of service tax. 16. We find that the Section 65 (105)(zzzz) was amended with effect from 01.07.2010 and "vacant land given on lease or licence for construction of a building or a temporary structure at a later stage to be used for furtherance of business or commerce" has been included in this definition and hence such leases became exigible to service tax under the category "renting of immovable property service". It is undisputed that the appellant has leased about 35 acres of land to BJCL so that latter could set up cement plants and carry on business. Prior to 01.07.2010, such leases were not exigible to service tax. In New Okhla Industrial Development Authority, the question as to whether the service tax can be levied under this clause for the period prior to 01.07.2010 was examined and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently vacant land given on lease or licence, for construction of a building or a temporary structure, to be used at a later stage for furtherance of business or commerce, would be "immovable property" and renting of this immovable property would be the taxable service, since 1-7-2010. 13. In view of clear exclusion of vacant land from the ambit of immovable property prior to 1-7-2010 it cannot gainfully be contended by Revenue, that clause (v) to Explanation I (introduced in 2010), was a mere clarificatory endeavour, explicating the implicit and inherent meaning of Section 65(105)(zzzz). Clause (v) is clearly an amendment which expands the scope of the taxable service; and prospectively. 14. Clause 75 of the Bill (which later came to be enacted as Finance Act, 2010) has proposed insertion of sub-clause (v) in Explanation I in Section 65(105)(zzzz) of the Act. The memorandum explaining the provisions in Finance Bill, 2010 also indicates that the amendments are being made in the definition of "renting of immovable property" service inter alia levy of service tax on renting of vacant land where there is an agreement between lessor and lessee for undertaking construction of buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is that what was leased by the appellant was not vacant land but it had buildings on it. He thus viewed it as 'lease of land as land incidental to the use of building or a part of a building' which was covered under clause (iv) of Explanation -1 and NOT as 'lease of vacant land'. The relevant paragraphs of the impugned order are as follows: "9.7. Thus, one question for discussion is whether a vacant land leased on rent for setting up a factory was specifically covered in the exclusion clause of the definition of 'Renting of Immovable Property Services' during the period from 01.06.2007 to 30.06.2010. I observe that clause (iv) to the Explanation 1 of sub-clause (zzzz) of clause 105 of Section 65 of the Act specified the following exclusion categories:- "A vacant land solely used for agriculture, farming, forestry, animal husbandry, mining purpose and; land used for educational, sports, circus, entertainment and parking purpose and; building used solely for residential purposes and building used for the purpose of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents camping facilities." From the above, I find that a vacant land leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement dated 23.11.2007 entered into between the appellant and BJCL for providing building on temporary basis to BJCL for office purpose and erroneously concluded that this was the same as the contract for the land. Learned Counsel has shown us that this was a separate licence agreement for different premises and not located on the land which was leased. Service tax has been paid on the rent received on these buildings licensed to BJCL and ST-3 returns have also been filed. 24. We also find that the Commissioner has relied on the work order given by BJCL to M/s Kuldeep Dhiman and M/s Motilal Brothers for construction at Maroda, Sector-6, Sector-1 to demolish existing structure and construct new structures as per the requirement of BJCL. Learned Counsel has demonstrated through the relevant papers that these work orders were entered into between BJCL and the contractors for making changes in those buildings which were licensed by the appellant to BJCL. They were not related to disputed vacant land leased to BJCL. 25. In view of above, we find that the appellant is not liable to pay service tax prior to 01.07.2010 on the land leased to BJCL. The demand to this extent cannot be sus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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