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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 ..... ORITY VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX [ 2014 (1) TMI 1203 - CESTAT NEW DELHI] , 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 was held in negative. The contract was for vacant land and not for a building or complex. Vacant land, even if it has some facilities incidental to the use of such land, was clearly excluded by sub-clause (c) to clause (iv) to the Explanation - it is found from the lease deed entered into by the appellant on 5th June, 2007 with BJCL and the supplementary lease deed entered into on 23rd November, 2007 that the lease was only for the land there was no lease of any building or structure as presumed by the Commissioner. 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 sustained and needs to be set aside along with interest and any penalty pertaining to such demand. So far as a period post 01.07.2010 is concerned, the appellant has already paid service tax and is only paying for waiver of penalty - Section 80 (2) of the Finance Act 1994 specifically provided for waiver of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome 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 providing for office purpose to BJCL. 4. Under dispute is the amount received towards the lease of 34.59 acres of land to M/s BJCL. The relevant period is 1.06.2007 to 31.02.2012. The appellant had not disputed the service tax liability from 01.07.2010 to 31.2.2012 as there was an amendment to the relevant charging section making 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 exigible to service tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereto, 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 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; 6. The service tax paid by the appellant for the period post 01.07.2010 has been appropriated by the Commissioner in the impugned order. For this period, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 altering the total area by the supplementary lease deed dated 23.11.2007 so as to facilitate construction of a railway siding which BJCL needed. After taking us through the lease agreements learned Counsel demonstrated that neither of these agreements have any mention of the buildings which the Commissioner supposed to be present. 10. In so far as the allegation that BJCL was setting up a split location ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 was held in negative. Paragraphs 11 to 15 of this order are reproduced below: 11 . In our considered view, clause (zzzz) of Section 65(105), prior to 1-7-2010 does not embrace renting of land within scope of the enumerated taxable service. On true and fair construction of the main part of clause (zzzz) it is clear that renting of any immovable property for use in course for furtherance of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 building or structure on such land for furtherance of business or commerce during the tenure of the lease. The Board Circular No. 334/1/2010-TRU, dated 26-2- 2010 (in paragraph 3) explains the purpose of the amendments to Section 65(105)(zzzz). Accordingly, the Circular explains that amendments are being made in the definition of this taxable service to provide that renting of vacant land wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion 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 leased on rent for setting up a factory is nowhere mentioned/covered in the above exclusion category. 19. Thus, the Commissioner has considered this as a lease as per clause (iv) of Explanation-1 Section 65 (105) (zzzz), i.e., lease of building or complex or estate . In such a lease, certain types of land are not included and the Commissioner states that the land in question doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 sustained and needs to be set aside along with interest and any penalty pertaining to such demand. So far as a period post 01.07.2010 is concerned, the appellant has already paid service tax and is only paying for waiver of penalty. 26. We find that Section 80 (2) of the Finance Act 1994 specifically provided for waiver of penalty under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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