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TMI Blog2022 (11) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... that on a perusal of the contract it is clear that the demand of Rs. 11,80,19,611/- has been confirmed considering the one time premium as a consideration towards rent and a perusal of the contract, shows that rent was being charged over and above the one time premium. It is a settled legal position that one time premium/salami cannot be considered as consideration towards rent and hence cannot be leviable to service tax under the category of renting of immovable property. Reference be made to the following decisions: (i) Kagal Nagar Parishad v/s. CCE, Order No. A/86376/2018 (ii) CST V/s. Greater Noida Development Authority, 2015 (40) STR 46 (All.) (iii) Greater Noida Industrial Development Authority V/s. CCE & ST. 2015 (38) STR 1062. 2.1 Leaned Authorized Representative on this issue argued that while reply to SCN, the appellant has admitted that the premium amount is collected as cost of the land which they have to handover to the government. It is pertinent to mentioned that appellant has leased out the land for 30 years and it is not sold and therefore the Premium amount collected as a cost of land is not acceptable. He argued that this amount is nothing but the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments for continuous enjoyment are in the nature of rent, the former is a Capital Income and the latter is the revenue receipt. Thus, the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the "premium" or 'salami' paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIDCO Ltd. 2015 (37) STR 122 and in the case of Maharashtra Industrial Development Corporation 2014 (36) STR 1295. We noticed that both these decisions are interim orders fixing the pre-deposit under Section 35F of the Central Excise Act. The decision of the Tribunal in the case of Greater Noida Development Authority (supra) is a final decision which has been approved by Hon'ble High Court of Allahabad. In view of above, the payment on one time premium/ salami cannot be charge to service tax under renting of immovable property service. The demand on this count is set aside. 3. The second issue in dispute is if service tax can be levied on signature bonus under the category of scientific or technical consultancy service. The appellant in respect of their contract with Torrent Power Ltd. received Rs. 10 Crore as signature bonus: Learned counsel argued that the amount of Rs. 1,03,00,000/- was confirmed under the category of scientific or technical consultancy service. This amount has been calculated on the sum of Rs.10 crores received as signature bonus which is a contractual payment made by one party to the contract to another. It was submitted that the department vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cientific or technical feasibility or any other scientific or technical aspect of a project, process or design, recommending an apt technology, suggestion for improvement in existing technology or process, providing consultation on any technical problem or about new technology, etc." Learned Authorized Representative further argued that as per the MoU signed between appellant Torrent Power Ltd (in short TPL) and Share Holder Agreement (SHA) dated 12.12.09 and at Paragraph 2.3 of said SHA, TPL shall pay a non-refundable Rs. 10 crore as signature bonus to GPSC for its "expertise and consultation service" in power project at the time of signing the SHA as per the Directives of Energy and Petrochemicals Department. Government of Gujarat (Para 3.2 of OIO). Learned Authorized Representative further argued that said MoU was for coal based power project at village Rampara -2/Uchchaniya in Taluka Rajula of District Amreli. From the browsing of the website/ portal of GSPL, the said project is mentioned under the Head of Coal Project, wherein it is clearly mentioned that "The ToR for the project has been approved by the MoEF New Delhi". This ToR is nothing but "STANDARD TERMS OF REFERENCE (T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable service. From the Show Cause Notice, it is seen that the allegations are based on the Memorandum of Understanding signed between GPCL (Appellant) and M/s Torrent Power Limited for promoting a joint venture company (JVC) for setting up 1000+ MW coal based Power Project at village Rampara 2/Uchchaiya in Taluka Rajula of District Amreli-Gujarat. Para 2.3 of the Share Holder Agreement executed between the party on 12.12.2009 mandates that the Torrent Power Limited shall pay a non-refundable amount of Rs. 10 Crores as signature bonus to GPCL for its expertise and consultation services in power project at the time of signing the share holder agreement as per the direction of Energy and Petrochemical, (Govt. of Gujarat) vide letter No. IPP-2006-4561-K dated 20.07.2009. The said clause 2.3 of the share holder agreement reads as follows: "2.3 Signature Bonus TPL shall pay non-refundable Rs. 10,00,00,000/- (Rupees Ten Crore Only) as signature bonus to GPCL for its expertise and consultation services in power project at the time of signing the SHA, as per the directives of Energy and Petrochemicals Department, Government of Gujarat, vide letter no. IPP-2006- 4561-K dated 20.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. Thus M/s. GPCL acts as a nodal agency for augmenting various needs of power sector." The scope of responsibilities of M/s GPCL is very wide. Only a small part of their services could possibly fall under the category of scientific and technical consultancy in terms of the abovementioned obligations of GPCL. Most of the services relates to formalities and clearances from the government. In these circumstances, we do not find that the evidence produced by the Revenue to substantiate the claim that the services provided by the appellant was in the nature of scientific and technical consultancy is absolute. 3.3 In the aforesaid circumstances, we do not find any merit in the argument of the Revenue that any service in the nature of Scientific and Technical Consultancy has been provided by the appellant to M/s Torrent Power Limited. Consequently, the demand on this count is therefore set aside. 4. The third issue raised in dispute is if the demand of Rs. 1,29,71,525/- under works contract services is sustainable: Learned counsel argued that the appellant had entered into contract with M/s. PGVCL for supply and erection of single point lighting connection on turnkey basis. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in calculation of taxable service, and therefore, penalty cannot be imposed. Learned Authorized Representative argued that from perusal of the Table enumerated at Para No. 24.1 of OIO, it is very clear that appellant has evaded the service tax. This plea is not tenable as Rule 2A of Service Tax Valuation Rules, 2006 is very clear and there is no ambiguity and there is no such issue of interpretation of Rule involved. Learned Authorized Representative submits that any lay man can understand the said Rule. If there was any doubt, appellant had to approached the Department and would have seek guidance or would have made request for provisional assessment of their ST-3 Returns. He further submits that Department have set up Help Desk, Tax Assistant Desk at Commissionerate level as well available on CBEC site with motive to resolve any difficulties faced by tax payers. Had it been not detected by Audit, appellant would have never come forward and would have paid. This act clearly shows their ill motive to evade the duty. 4.3 We have considered rival submissions. We find that the issue relates to valuation of the service tax provided by the appellant to M/s PGVCL for supply and erecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability when any provision is contravened or there is a breach of trust placed on the service provider. Further, Sec. 70 of the Finance Act, 1994 casts an obligation on the service provider to himself assess the tax due on the services provided by him. Likewise, Rule 9(6) of the Cenvat Credit Rule also casts the burden of proof regarding the admissibility of the CENVAT credit on the service provider. Whereas it appears that the facts. and figures mentioned in the Audit Report were not reflected in the periodical ST-3 returns filed by the assessee nor were the same ever informed by them to the department in any manner. The material facts came to the knowledge of the department only during the course of audit of the said assessee. Had it not been detected by the Audit, the same would have gone unnoticed causing loss of revenue to the exchequer. It appears that the assessee by not disclosing the material facts wholly and truly has suppressed/concealed the said facts from the department. Further it appears that they have mis-declared the value of taxable services of renting of immovable property provided by way of leasing of lands for Solar Park at Charanka in their periodical retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that service tax of Rs.1,29,71,525/- alongwith interest of Rs.49,02,189/- on value of 'Work Contract Service' provided to M/s PGVCL was paid by them before issuance of show cause notice, hence no penalty in imposable. on them. However, as elaborated at para 24 and sub-paras thereof, I find that M/s GPCL had made short payment of service tax of Rs.1,29,71,525/- during the period 2010-11 and 2011-12 and this short payment of service tax has been paid by them only on 27.11.2013 with interest of Rs.49,02,189/- on 27.8.2014 that too after pointed out by the central excise auditors. Further, M/s GPCL has also contended that service tax of Rs.9,12,76,391/- alongwith Interest of Rs.2.20 crores, on development charge received from various developers, was paid by them before issuance of show cause notice, no penalty Is Imposable for the same. However, I find that during the year 2012-13, M/s GPCL issued 22 Invoices to various parties for recovery of development charge on which service tax payable was worked out to Rs.9,12,76,391/-. As discussed at length at para 27 and sub-paras thereof, the assessee had not discharged service tax within six month of date of Invoice. It is observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad has in the case of M/s. Dharamvir Singh & Company reported at 2018 (8) GSTL 440. held that when the break up of services is not given in the show cause notice and no specific clause is mentioned under which the demand is proposed, then such demand is not sustainable. The Tribunal, in the case of M/s. Balaji Enterprises reported at 2020 (33) GSTL 97 has held that when the show cause notice proposes a service category, but does not specify which clause is being invoked for the purpose of demand, then such show cause notice is vague and the demand is not sustainable. Similar orders have also been passed by the CESTAT. Mumbai in the case of M/s. Ceat India Ltd. reported at 2016 (331) ELT 456 and in the case of M/s. Unity Arrow Shipping Agency reported at 2014 (310) ELT 933. Therefore, it is a settled legal position that when the show cause notice is being issued, the service category and also the clause under which the tax is proposed to be demanded has to be considered very clearly and if the show cause notice is vague to the extent that it does not point out category of service or the clause under which the service tax is being demanded, then such show cause notice is vague and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d specific category under Business Auxiliary Service specified in the show cause notice, the demand cannot be sustained. In view of above, demand under this head and the penalty imposed under this head is set aside. 6. Whether service tax of Rs. 97,335/- is payable on the income of Rs. 9,45,000/- during the year 2009-10: Learned Counsel argued that the case of the department is that the appellant received rent income of Rs.9,45,000/- in the year 2009-10, and therefore, there was a short payment of Rs.97,335/- being service tax thereon. Learned counsel submitted that during the relevant period of time, there was a basic exemption limit of Rs. 10,00,000/- and since the amount received towards rent income was less than the threshold limit of exemption, the appellant had not paid service tax thereon. The case of the department that because the appellant received signature bonus and hence the threshold limit of Rs. 10,00,000/- was crossed during the relevant period of time is also not a valid case for the purpose of invoking the extended period of limitation. The appellant was under the impression that signature bonus was not leviable to service tax and hence since the rent received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tis Resources Corporation Pvt. Ltd. on the grounds that the services were provided by an overseas entities and the appellant being the recipient of such services was liable to pay service fax under the reverse charge mechanism. The same is the case as regards the demand of Rs.4,39,997/- on the amounts remitted by the appellant to M/s. Solar Media Ltd. It is submitted that even if the case of the department is correct the present one is a situation where the amount of service tax if payable was available as cenvat credit to the appellant, and therefore, such being a revenue neutral situation, the extended period of limitation could not have been invoked. He argued that it is a settled legal position that when cenvat credit of the tax paid is available to an assessee himself, then the intention to evade the payment of tax cannot be attributed and hence the extended period of limitation cannot be invoked. Reference be made to the following decisions: 1. M/s. Jay Yuhshin Ltd. reported in 2000 (119) ELT 718. 2. M/s. John Energy Ltd. Order No. A/12620/2018 dated 26.11.2018 3. M/s.Murugappa Morgan Thermal No. A/11638/2019 dated 21.08.2019 He further argued that the appellant has remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational Speakers for Summit 2012 at Ahmedabad. Thus, payment made by appellant to said overseas M/s. Solar Media Ltd., London, was for taxable service of 'promotion or marketing of brand of goods/service/events' and appellant failed to pay service tax under RCM. The said service is covered under sub rule (iii) of Rule 3 of Taxation of Services (provided from Outside India and Received in India) Rules, 2006. He argued that the Hon'ble Bombay High Court in case of Indian National Shipowners Association v. Union of India and reported in 2009 (13) S.T.R. 235 (Bom.) has held that The Finance Act was amended and Section 66A was inserted by Finance Act. 2006 w.e.f. 18.04.2006, the Government got legal authority to levy service tax on the recipients of the taxable service Because of the enactment of Section 66A, a person who is resident in India or business in India becomes liable to be levied service tax when he receives service outside India from a person who is non-resident or is from outside India The Hon'ble Supreme Court has upheld the same. Union of India v. Indian National Shipowners Association 2010 (17) S.T.R.J57 (S.C.). Learned Authorized Representative furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment that credit of these taxes paid would be admissible to them, they have not mentioned under what are the taxable output services in respect of which these input service could be availed as cenvat credit. In absence of the said evidences, the reliance on the aforesaid case law cannot be made. In the appeal memorandum, the appellants have argued that the Commissioner has failed to give any findings on the defence regarding non-taxability of services received from M/s Atlantis Resources Corporation Private Limited and M/s Solar Media Limited. The appellant had contended before the adjudicating authority that the entire activity in both these cases were outside India and the appellant was not the service recipient. It has been argued that the appellant had submitted the details of agreement with M/s Atlantis Resources Corporation Private Limited and M/s Solar Media Limited to the adjudicating authority. It is noticed that Commissioner has given findings on the taxability both in case of the M/s Atlantis Resources Corporation Private Limited and M/s Solar Media Limited in para 28 of the impugned order. Para 28 of the order reads as follows: 28.1 Regarding applicability of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices were rendered in India and received by M/s GPCL In India. Hence, in terms of Rule 3(iii) of "Taxation of service (provided from outside India and received In India) Rules, 2006 read with Section 66A of the Finance Act, 1994, I hold that M/s GPCL, being recipient of the service, is liable to pay service tax of Rs.9,50,404/- on the payment of Rs.92,27,225/- made to M/s Atlantis. I find that all the argument put forth by the assessee are not tenable. In the Instant case, the only condition to be satisfied for the services, provided by M/s Atlantis and received by M/s GCPL, to be taxable is that the service recipient should be located in India. Undoubtedly, M/s GPCL, the recipient of service, is located in India. Therefore, I hold that the service provided by M/s Atlantis and received by M/s GPCL is taxable and consideration paid against the said service is liable to service tax at the end of the service receiver i.e. M/s GPCL. 28.4 Regarding applicability of service tax on services provided by M/s Solar Media Ltd. (SML), M/s GPCL has contended that the entire activities of SML were undertaken outside India and therefore the service rendered by SML outside India to GPCL would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case, the only condition to be satisfied for the services, provided by M/s SML and received by M/s GPCL, to be taxable is that the service recipient should be located in India. Undoubtedly, M/s GPCL, the recipient of service, is located in India. Therefore, I hold that the service provided by M/s SML and received by M/s GPCL is taxable and consideration paid against the said service is liable to service tax at the end of the service receiver i.e. M/s GPCL." The appellant have not raised any fresh grounds in their appeal memorandum. We find significant force in the argument in order-in-original. In view of above, we do not find any merit in the defence of the appellant. The demand under this head along with penalties is upheld. Appeal on this count is dismissed. 8. The seventh issue raised in dispute is if service tax of Rs. 9,12,76,391/- is payable on the gross amount of Rs. 74,61,38,167/- when such amounts were not received: Learned counsel argued that the demand of Rs. 9,12,76,391/- has been confirmed against the appellant on the grounds that the appellant was paying service fax on receipt basis, however, as per the service tax rules, with effect from 01.07.2011 the liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuse. He argued that the appellant is well aware of the Act/ Rules, but he has refrained from payment of service tax in time and violated the provisions of finance act and therefore penal action is rightly invoked. 8.2. This issue relates to failure in payment of service tax by the appellant as per the changes made in the Service Tax Rules w.e.f. 01.07.2011. The liability to pay service tax prior to 01.07.2011 was arising at the time of receipt of consideration. The appellant claimed that he was not aware of the change which came on 01.07.2011 and consequently in respect of 22 invoices, the appellant failed to pay service tax on time. The appellant has contended that they had bonafide belief that there was no change in the manner of payment on 01.07.2011 and therefore, it was a bonafide error on their part. It is seen that the appellant is not a small assessee and the claim of ignorance of law is not good enough to bypass their responsibilities. The appellant has however discharged the said liability along with interest. The law was not ambiguous but was very clear at the material time. In these circumstances, we do not find any merit in the arguments of the appellant. 8.3 It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also be as per Section 11A, and therefore, if the short payment of tax was not due to any mala-fide intention, then the demand of interest invoking the extended period of limitation would not be sustainable. Therefore, in the present case, since the department has not alleged any fraud, collusion or mala-fide intention with regards to such amount of cenvat credit, interest cannot be demanded invoking the extended period of limitation. Therefore, the demand of interest is time barred. 9.2 Learned Authorized Representative on this issue argued that it is not in dispute that appellant have availed the cenvat credit on various services for Solar Park Project and plot developed by appellant himself. Since, services cannot be provided to oneself, no service tax was leviable on such development expenses as covered under exempted service as defined under Rule 2 (e) of the CCR,04. Therefore, as per the provisions of Rule 6 (3) of CCR,04, appellant was required to pay an amount of Rs. 13,43,547/- @5%/6% on the value of such exempted service alongwith interest. He submits that the appellant agreed with the contention and paid the same on 01.08.2013 without interest. Appellant claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of Rs. 13,473,547/-, relates to Wind Mills operated by the appellant. However, in many circumstances, credit of services availed in respect of Wind Mills located away from the factory is admissible. The exact nature of transaction in the instant case is not clear from the appeal memorandum or from arguments made by the appellant. Moreover, this argument was not raised before the lower authority. In these circumstances, we set aside the demand on this count and remit the matter back to the original adjudicating authority for fresh adjudication. The appellant have also stated that in these circumstances demand of an amount of 5% / 6% under Rule 6 of the Cenvat Credit Rules could not have been made but only the demand of the actual amount of credit taken could have been made. The said issue can also be examined by the adjudicating authority in the remand proceedings. The appeal on this issue is allowed by way of remand to original adjudicating authority. 10. The ninth issue in dispute is if demand of cenvat credit of Rs. 17,90,125/- is sustainable in the present case: Learned counsel argued that the appellant had during the course of adjudication given a bifurcation of various s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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