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TMI Blog2022 (8) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... ity that capital gains can be earned only against change in ownership, not otherwise, cannot be agreed upon. It is now established law that any amount received on account of surrender of tenancy rights is also liable to capital gains tax as per the Income Tax Act, 1961. By the surrender of the agreement rights in the property by the appellants it cannot be said that the appellants agreed to refrain from an act or agreed to tolerate any act of the eventual buyer or tolerated any act or situation. For Shivshankar Logitex Pvt Ltd - HELD THAT:- In this case of purchase of agricultural land by the appellants at the price of Rs 15,00,000/- earnest money was paid to the owner. In this case too another company by the name Shivshankar Logitex Pvt Ltd wanted to purchase the said land and after mutual discussion the appellants released their agreement rights to the property for Rs 36,50,000/-. In this case also, we hold that since the rights or benefits of the appellants arose out of an immovable property the same was outside the scope of service and, therefore, outside the scope of service tax - Further, in this case too, by the surrender of the agreement right in the property b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Thermax Ltd - HELD THAT:- Since M/s Thermax had not released payments to M/s Ensol Power Pvt Ltd the appellants made payment to M/s Ensol Power Pvt Ltd and, in turn, booked the amount paid on M/s Thermax account. Hence, the appellants issued a debit note on Thermax for Rs 2,00,000/-. Thus, it is seen that this Rs 2,00,000/- is nothing but the reimbursement by M/s Thermax for the amount paid by the appellants on their behalf to M/s Ensol Power Pvt Ltd. - This cannot be considered as a service provided by the appellants as this was nothing but reimbursement. No service of any sort had been rendered by the appellants to M/s Thermax Ltd. Nilu Construction Pvt Ltd - HELD THAT:- The surrender of tenancy rights is liable to capital gains tax as per the Income Tax Act, 1961 - Further, it also cannot be said that the appellants had agreed to an obligation to refrain from an act or tolerated an act or a situation or did an act. M/s Siddhartha Land and Building Pvt Ltd - HELD THAT:- The surrender of tenancy rights on receipt of some compensation is subject to capital gains tax and is not covered under clause (e) of section 66E of the Finance Act 1994 - Further, as per the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade payment of service tax. Courts have consistently held that the extended time limit can be invoked only if there is a positive act on the part of an assessee to conceal anything from the department. There must be a deliberate attempt to suppress information for invoking the extended period. The appeals are allowed, on merits as well as on limitation. - Service Tax Appeal Nos.77259 of 2019 With 77260 of 2019 - FINAL ORDER NO.75452-75453/2022 - Dated:- 10-8-2022 - HON BLE SHRI P. K. CHOUDHARY, JUDICIAL MEMBER AND HON BLE SHRI P. ANJANI KUMAR, TECHNICAL MEMBER Shri A.K.Prasad, Advocate for the Appellant Shri S.Mukhopadhyay, Authorized Representative for the Respondent ORDER PER P.K.CHOUDHARY : This is an appeal against the Order-in-Original No.3/CCE/S.Tax/RKL/2019-20 dated 19.07.2019 passed by the Principal Commissioner of GST Central Excise, Rourkela. 2. The brief facts of the case are that M/s Bhaskar Steel and Ferro Alloy Pvt Ltd ( hereinafter referred to as the appellants or the appellant company ) having their registered office in Kolkata are engaged in the manufacture of Sponge Iron and M. S. billets for which they were having c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey already paid. (2). It is the view of the department that the amount received by the appellants was an agreement for refraining from an act or for tolerating an act or situation and was, therefore, liable to service tax under clause (e) of Section 66E of the Finance Act 1994. (3). It is submitted that as per definition of service under section 65B(44) of the Finance Act, 1994, the following will not amount to service, namely, an activity which constitutes merely a transfer of title in goods or immovable property by way of sale, gift or in any other manner (4) As per the Service Tax Education Guide issued by the CBEC the words immovable property would have the same meaning as given in clause 26 of the General Clauses Act, 1897. In other words immovable property shall also include land benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth. (5). The Hon ble Allahabad High Court in the case of Kanhiya Lal Another versus Satya Narayan Pandey (AIR1965ALL 496) has held that any benefit to arise out of an immovable property would also be included in the definition of immovable property . In the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussion the appellants released their agreement rights to the property for Rs 36,50,000/-. In this case also, since the rights or benefits of the appellants arose out of an immovable property the same was outside the scope of service and, therefore, outside the scope of service tax. (2). Further, in this case too, by the surrender of the agreement right in the property by the appellant it cannot be said that the appellant agreed to refrain from an act or agreed to tolerate any act of the eventual buyer or tolerated any situation. The Pr Commissioner has not clarified how these clauses are applicable in the case of the appellants. C. M/s Shanti Enterprise (1). In this case the appellants entered into an agreement with another buyer for purchase of non-agricultural land @ Rs.1,51,00,000/- and an advance payment was also made. Subsequently another company, M/s Shanti Enterprise wanted to purchase the said land for developing it and, accordingly, the appellants surrendered their agreement rights at a mutually agreed price of Rs.2,08,00,000/-. On the same lines, in this case also, the transaction did not relate to any service and, therefore, no service tax was leviable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the case of the appellants. F. Vijay Kumar Dalmia and STB Exports Pvt Ltd. (1). In this case the appellants had purchased 204.75 satak of land from one Vijay Kumar Dalmia. Subsequently, out of this area of land 82 satak land was sold by the appellants to M/s STB Exports Pvt Ltd. In the whole transaction of sale/purchase of immovable property the appellants earned profit of Rs 64,31,000/-. This is a clear case of outright sale and purchase of immovable and is outside the scope of service and hence, not liable to service tax. (2). The Principal Commissioner has not even discussed the factual submissions made by the appellants on this point. G. M/s Thermax Ltd. (1). The appellants entered into an agreement with M/s Thermax Ltd for supply of manpower to the appellants plant . M/s Thermax Ltd, in turn, entrusted this job to M/s Ensol Power Pvt Ltd, their sub-vendor. M/s Ensol Power Pvt Ltd then supplied the manpower on behalf of M/s Thermax to the appellants. For this work the appellants booked the payment on the account of M/s Thermax. But since M/s Thermax had not released payments to M/s Ensol Power Pvt Ltd the appellants made payment to M/s Ensol Power Pvt L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellants surrendered their tenancy rights on receipt of compensation of Rs.3,25,00,000. (2). It is established law that surrender of tenancy rights is not covered under clause (e) of Section 66E of the Finance Act 1994. (3). Further, as per the decision of the Hon ble Allahabad High Court in the case of Kanhiyalal and Anr ( supra) the tenancy rights are also benefits arising out of the immovable property and outside the definition of service and, therefore, cannot be subjected to Service Tax . (4). Surrender of tenancy rights is liable to capital gains tax as per the Income Tax Act, 1961 [ CIT vs D.P.Sandu Brothers- MANU/SC/0070/2005]. J. M/s Madanlal Brijlal Pvt Ltd. (1). The appellants were in occupation, as tenant, of a portion of the building owned by M/s Madanlal Brijlal Pvt Ltd. The owner wanted to construct a building at the said premises and entered into a rehabilitation agreement with the appellants to vacate the premises on the condition that the appellants would be provided a larger area in the new building. However, subsequently the appellants surrendered their tenancy rights on payment of Rs.2.40 crores as compensation. (2). It is establishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (8). Tirupati Balaji Furnaces Pvt Ltd vs Commissioner of Central Goods Services Tax, Jaipur [2022-TIOL-77-CESTAT-DEL] (9). Rajasthan Rajya Vidyut Prasaran Nigam Ltd vs Commissioner of CGST, Customs and Central Excise, Jodhpur-1 [2022-TIOL-134-CESTAT-DEL] (10). MNH Shakti Ltd vs Commissioner CGST AND Central Excise, Rourkela [2021-TIOL-732-CESTAT-KOL] (11). Jindal Steel and Power Ltd vs Principal Commissioner of CGST Central Excise, Ranchi [2022-TIOL-408-CESTAT-KOL] 9.4 Limitation (1). In the instant case the show cause notice is dated 28.09.2018 whereas the period covered 01.04.2013 to 31.03.2015. The demand has been raised by invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act 1994. The only ground for invoking the extended period is that the above amounts were not reflected in the Service Tax returns filed by the appellants and that had the DGGI not intervened and unearthed the facts the activities of the appellants would not have come to surface. These allegations have been made in para 7 of the show cause notice. This is the same ground on which the Principal Commissioner has upheld the invoking of the extended pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is submitted that this provision is applicable only in respect of prosecution proceedings before a court of law and not in departmental adjudication. (3) Even otherwise, there is nothing in the show cause notice to show that Shri Nikunj Beriwal knowingly and deliberately abetted the evasion of service tax. Therefore, no penalty is imposable on him also. 10. The learned authorised representative for the Revenue reiterated the findings of the impugned order. 11. We have examined the rival submissions and also perused the records. In each case the facts are different. These are discussed below serially. A. BGB Spintex Pvt Ltd and CFM Infratex Ltd (1). The appellants had entered into an agreement on 16.05.2013 with two land owners for purchase of agricultural land at the price of Rs 35,00,000/- and had also paid earnest money of Rs 3,50,000/-. A company by the name CFM Infratex Ltd wanted to purchase the said agricultural land already booked by the appellants. Accordingly, they negotiated a deal with the appellants and agreed to buy the appellants rights in the properties for Rs 3,68,50,000/- inclusive of the earnest money already paid. (2). It is the view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A similar definition is contained in Section 4 (23) ot the U. P. General Clauses Act with the modification that 'immovable property' shall not include standing timber, growing crops or grass. The definition is clearly illustrative and not exhaustive, and can cover buildings and benefits to arise out of buildings. Building is a thing attached to the earth and is by itself an immovable property. In the case of land, benefits to arise out of land are also immovable property , and consequently, in the case of buildings, benefits to arise out of buildings can be deemed to be immovable property. 6. Benefits to arise out of building can be of various kinds depending upon the rights which can be enjoyed by the person. Owner of a building not in occupation thereof can exercise his proprietary rights by letting the accommodation to tenants and collecting rent from them. An owner in occupation of the building enjoys not only the proprietary rights but also the right of occupation. A lessee including tenant also enjoys benefits arising out of the building. He has the right to occupy the building on payment of the lease money till the tenancy is determined by the lessor or less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gram [ 2019 (27) G.S.T.L. 712 (Tri. - Chan.)] wherein it has been held that any right relating to immovable property is a benefit arising out of immovable property and, therefore, is immovable property itself. The relevant part of the judgment is extracted below:- 15. As immovable property has not been defined in the Finance Act, 1994, therefore, as per Section 3(26) of the General Clauses Act, 1897, the immovable property means 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; 16. On going through the said definition, the immovable property includes land benefit arising out of land. In the case of 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 Bahadur and Others v. Sikandar and Others wherein the Hon ble Apex Court observed as under :- Therefore, the principal question we have to consider is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues is a lease of immovable Allahabad High Court in Smt. Dropadi Devi v. Ram Das and Ors. MANU/UP/0120/1974 : AIR1974AII473 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 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. v. 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 no 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 Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for use of TDR can be specifically enforced. The said dictum of the Division Bench is later on followed by a learned single Judge of this court in 2009(4) Mh.L.J. 533 in the matter of Jitendra Bhimshi Shah v. Mulji Narpar Dedhia HUF and Pranay Investment and ors. The learned judge 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 said Section 36 and also 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from 'A' or from 'B' and if in such a situation 'A' and 'B' enter into an agreement that 'A' would not supply coal to the appellant provided 'B' paid some amount to it, then in such a case, it can be said that the activity may result in a deemed service contemplated under section 66E (e). 30. The activities, therefore, that are contemplated under section 66E (e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. (13). Similar views have been taken in the decisions relied upon by the Appellants. B. Shivshankar Logitex Pvt Ltd (1). In this case of purchase of agricultural land by the appellants at the price of Rs 15,00,000/- earnest money was paid to the owner. In this case too another company by the name Shivshankar Logitex Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said agreement and the appellant had entered into the said agreement as the developer of the land. The land owned by these companies was not contiguous parcel of the land and were as such not fit for the proper development. The owners of the land had given an assurance to the appellant that remaining intermittent pieces of land would be acquired and handed over to the appellant within a specific time frame so that the entire land becomes contiguous parcel of land which would fit for the development. As per the Development Agreement the appellant was to be provided by the companies a contiguous piece of land for the development, however, the same could not materialize and hence as per the Development Agreement. The appellant could not get the land as agreed upon and as per the agreements were entitled for a liquidated damage or compensation. The owners of the land has terminated Development Agreement, dated May 21, 2019 due to some other technical reasons also and confirmed that they were not in a position to meet the Development Agreements and agreed for the settlement with the appellant. Ultimately, the Development Agreement with the appellant was cancelled and the land ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the appellants and M/s Autocare Services to cancel the sale agreements and relinquish the appellants rights on payment of consideration/profit of Rs 3,38, 24,939/-. (2) Since this amount was also received in connection with surrender of rights or benefits arising out of immovable property the same is outside the scope of service and, hence, not liable to service tax. (3). Further, it also cannot be said that the appellants had agreed to an obligation to refrain from an act or tolerated an act or a situation or did an act. F. Vijay Kumar Dalmia and STB Exports Pvt Ltd (1). In this case the appellants had purchased 204.75 satak of land from one Vijay Kumar Dalmia. Subsequently, out of this area of land 82 satak land was sold by the appellants to M/s STB Exports Pvt Ltd. In the whole transaction of sale/purchase of immovable property the appellants earned profit of Rs 64,31,000/-. This is a clear case of outright sale and purchase of immovable and is outside the scope of service and hence, not liable to service tax. G. M/s Thermax Ltd (1). The appellants entered into an agreement with M/s Thermax Ltd for supply of manpower to the appellants plant . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 1994. (3). Further, as per the decision of the Hon ble Allahabad High Court in the case of Kanhiyalal and Anr ( supra) the tenancy rights are also benefits arising out of the immovable property and outside the definition of service and, therefore, cannot be subjected to Service Tax . J. M/s Madanlal Brijlal Pvt Ltd (1). The appellants were in occupation, as tenant, of a portion of the building owned by M/s Madanlal Brijlal Pvt Ltd. The owner wanted to construct a building at the said premises and entered into a rehabilitation agreement with the appellants to vacate the premises on the condition that the appellants would be provided a larger area in the new building. However, subsequently the appellants surrendered their tenancy rights on payment of Rs 2.40 crores as compensation. (2). As already discussed above surrender of tenancy rights on receipt of some compensation is subject to capital gains tax and is not covered under clause (e) of Section 66E of the Finance Act 1994. (3). Further, as per the decision of the Hon ble Allahabad High Court in the case of Kanhiyalal and Anr ( supra) the tenancy rights are also benefits arising out of the immovable proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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