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TMI Blog2024 (8) TMI 1375X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. 12/2017 Central Tax (Rate) dated 28.06.2017 and therefore cannot be treated as an exempt supply. - DR TANISHA DUTTA AND JOYJIT BANIK, MEMBER Applicant s Representative Heard : Mr. Ankit Kanodia, Authorized Advocate. Preamble A person within the ambit of Section 100 (1) of the Central Goods and Services Tax Act, 2017 or West Bengal Goods and Services Tax Act, 2017 (hereinafter collectively called the GST Act ), if aggrieved by this Ruling, may appeal against it before the West Bengal Appellate Authority for Advance Ruling, constituted under Section 99 of the West Bengal Goods and Services Tax Act, 2017, within a period of thirty days from the date of communication of this Ruling, or within such further time as mentioned in the proviso to Section 100 (2) of the GST Act. Every such appeal shall be filed in accordance with Section 100 (3) of the GST Act and the Rules prescribed thereunder, and the Regulations prescribed by the West Bengal Authority for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empted from payment of tax vide serial number 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as amended from time to time. The said entry reads as follows: SI.No. Chapter, Section, Heading, Group or service Code (Tariff) Description of Services Rate (Per Cent) Condition 41 Heading 9972 Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20 percent or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area. Explanation - For the purpose of this exemption, the Central Government, State Government or Union territory shall have 20 per cent or more ownership in the entity directly or through an entity which is wholly owned by the Central Government, State Government or Union territory. NIL Provided that the leased plots shall be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial office complex. The Applicant also states that as per the tender document in Plot Details Annexure-1, the list of permitted purpose of lease is given as- Mercantile building, Business building, Institutional building, Assembly building (Club, political religious purpose are not permitted) Further, the said tender document defines each of the above terms in clause (8) as- 8.1 Institutional building : That is to say any building or part thereof ordinarily providing sleeping accommodation for occupants and used principally for the purposes of medical or other treatment or care of persons suffering from physical or mental illness, disease or infirmity, care of infants, convalescents or aged persons and for penal or correctional detention in which the liberty of the inmates is restricted, such building shall include hospitals, clinics, dispensaries, sanatoria, custodial institutions and penal institutions like jails, prisons, mental hospitals and reformatories. 8.2 Assembly building : That is to say any building or part thereof where groups of people congregate or gather for amusement or recreation or for social, patriotic, civil, travel, sports and similar other purposes as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lets etc. In other words, the original lessee will be a business integrator where various other stake holders/investors/retailers/service providers will operate under the business integrator (original lessee) as sub-lessees. As further stated by the applicant, in the present case he will be setting up their corporate office building wherein all the financial activities of the Applicant shall be undertaken. Further, as per the sketch of the plot annexed with the tender document, it is clear that the plot is in an industrial area as there was another unit of India Foils Limited running at the said plot. Thus, the second condition as stated above is duly satisfied in the instant case. 2.5 As regards the third condition stated above, the applicant states that the lessor, SMPK in the instant case, is a body incorporated under the Ministry of Ports, Shipping and Waterways, Government of India. The lessor is directly controlled by the Central Government department. 2.6 The applicant argues that SMPK in its official website smportkolkata.shipping.gov.in has declared vide notice dated 14.12.2018 bearing reference number FIN/368/B that SMPK is covered under the category of notified persons u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is with Central Government. In this context, the applicant also relies on the Major Port Authorities Act, 2021 and states that Chapter V of the said Act deals with supervision of Central Government wherein various powers of Central Government has been noted. 2.10 The applicant further states that for exemption under Sl. No. 41 of Notification No. 12/2017-CT (R) dated 28.06.2017 as amended from time to time, the exemption is provided to an entity having 20 per cent or more ownership of Central Government, State Government, Union territory. Thus, in this case, the word ownership assumes importance. 2.11 In this context, the applicant refers to the Advanced Law Lexicon 6th Edition by P Ramanatha Aiyar Vol 3, where ownership means- The collection of rights allowing one to use and enjoy property, including the right to convey it to others. Ownership implies the right to possess a thing, regardless of any actual or constructive control. Ownership rights are general, permanent and inheritable. The Applicant states that the control of the said Major Ports rests with the Central Government as there is no share capital in such organisations to determine the ownership in terms of percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition as per the order issued by the State Government in this regard: Provided also that in case of any violation or subsequent change of land use, due to any reason whatsoever, the original lessor, original lessee as well as any subsequent lessee or buyer or owner shall be jointly and severally liable to pay such amount of central tax, as would have been payable on the upfront amount charged for the long term lease of the plots but for the exemption contained herein, along with the applicable interest and penalty: Provided also that the lease agreement entered into by the original lessor with the original lessee or subsequent lessee, or sub-lessee, as well as any subsequent lease or sale agreements, for lease or sale of such plots to subsequent lessees or buyers or owners shall incorporate in the terms and conditions, the fact that the central tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and that the parties to the said agreements undertake to comply with the same. (emphasis inserted) 3.2 On the basis of the above condition, not only the plot should be used for industrial or financial activity but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plantations Labour Act, 1951 (69 of 1951); or (2) hospitals or dispensaries; or (3) educational, scientific, research or training institutions; or (4) institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service; or (5) khadi or village industries; or (6) any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or (7) any domestic service; or (8) any activity, being a profession practised by an individual or body or individuals, if the number of persons employed by the individual or body of individuals in relation to such profession is less than ten; or (9) any activity, being an activity carried on by a co-operative society or a club or any other like body of individuals, if the number of persons employed by the co-operative society, club or other like body of individuals in relation to such activity is less than ten; 3.7 In the application, the allotment letter does not specify structure or activities of commercial office complex . Also the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 21 of the Act. So, SMPK holds their properties inherited from the Board of Trustees. 3.12 Section 23 of the Act clearly distinguishes the authority of the Board and the Central Government, in the matter that, where any immovable property is required for the purposes of the Board, the Central Government, or as the case may be, the State Government may, at the request of the Board, procure the acquisition thereof under the provisions of the Right to Fair Compensation and Transparency in Rehabilitation and Resettlement Act, 2013. 3.13 This statute also empowers the Board of Major Ports (including SMPK) to create specific master plan in respect of any development or infrastructure established or proposed to be established within the port limits. The Board also decides the rate for assets and services available at SMPK, as prescribed in Sec 27 of the Act, and there is no control of the Central Government for such. 3.14 Section 33 of the Act empowers the Board to take financial decisions, like it can raise loans for its capital expenditure or working capital requirements. The loans may be raised by Board in the open market within India and in any country outside India on port securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceeding twelve months, as it may consider necessary; or (b) re-constitute the Board by making fresh appointment to all posts of the Board on such terms and conditions as the Central Government may consider necessary, and in such case, any person who stand removed from their offices under clause (a) of sub-section (2) shall be deemed disqualified for appointment. 3.16 So, it is clear from the above mentioned Section that in normal course of time, the Central Government does not have any control in the management of the Board, and it operates as an autonomous body. The applicant, in this case, referred a particular transaction when the Board of SMPK is managing and exercising the administrative and financial power, so the Central Government had no control over the management in that period and the Central Government only plays a supervisory role. It is also to be mentioned here that the Central Government is liable to place a full report to be laid before the Parliament for taking control of the management of the Board, as prescribed u/s 49 of the Act. When the board of SMPK takes administrative and financial decisions, raises loans, pays salaries and other financial benefits t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authority that the exemption should not be allowed as it does not cover all conditions laid down in the notification mentioned above. Additional submission by the applicant 4.1 In course of personal hearing, the authorized advocate of the applicant made a prayer to allow the applicant to rephrase the question admitting the fact that the land would not be used for industrial activity. The prayer was allowed and the applicant rephrased the question as follows: Whether the upfront premium payable by the applicant towards the services of by way of granting of long term lease of thirty years, or more of industrial plots or plots for development of infrastructure for financial business by SMPK is exempted under entry 41 of Notification No. 12/2017-CGST (Rate) dated 28.06.2017? Observations Findings of the Authority 5.1 We have gone through the records of the issue as well as submissions made by the authorized advocate of the applicant during the course of personal hearing. We have also considered the submission made by the officer concerned from the revenue. The issue before us is to determine whether the services of leasing of an industrial plot of land at Taratala Road for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the aforesaid entry as to whether the property leased out is an Industrial plot or plots for development of infrastructure for financial business or not, the conditions as further laid down in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time may be revisited: Provided that the leased plots shall be used for the purpose for which they are allotted, that is, for industrial or financial activity in an industrial or financial business area: Provided further that the State Government concerned shall monitor and enforce the above condition as per the order issued by the State Government in this regard: Provided also that in case of any violation or subsequent change of land use, due to any reason whatsoever, the original lessor, original lessee as well as any subsequent lessee or buyer or owner shall be jointly and severally liable to pay such amount of central tax, as would have been payable on the upfront amount charged for the long term lease of the plots but for the exemption contained herein, along with the applicable interest and penalty: Provided also that the lease agreement entered into by the original lessor wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure-VI: Conditions of Lease] The tax components will be as in vogue from time to time. Presently, the tax components are as mentioned below:- Payment of G.S.T Upfront @ 18% on the aggregate of quoted / accepted rent and occupier s share of Municipal Taxor as may be reviewed by Govt. of India Token annual rent (where upfront is paid) 18 % on token annual rent or as may be reviewed by Govt. of India Annual rent @ 18% on the aggregate of quoted / accepted rent and occupier s share of Municipal Taxor as may be reviewed by Govt. of India [Clause 15(f) of Annexure-VI: Conditions of Lease] 5.9 Thus, even we assume that the applicant has taken on lease an industrial plot for financial business from SMPK, the said supply of services doesn t fulfill all the conditions as specified in the relevant entry of the exemption notification supra. 5.10 Now we take the issue to decide the third condition for availing the benefit of exemption as per the aforesaid entry, i.e. whether service provider is a state Government Industrial Development Corporation or Undertaking or any other entity having 20 per cent. or more ownership of Central Government, State Government, Union territory (either direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of entering into the lease agreement shall not be exempted by virtue of clause 41 of the Notification No. 12/2017-Central Tax (Rate). [emphasis supplied] 5.15 Thus, the third condition for availing the benefit of exemption as per the aforesaid entry, i.e. whether service provider is a state Government Industrial Development Corporation or Undertaking or any other entity having 20 per cent. or more ownership of Central Government, State Government, Union territory (either directly or through an entity wholly controlled by the Central Government, State Government, Union territory) does not get fulfilled in this case. 5.16 Regarding the fourth condition for availing the benefit of exemption as per the aforesaid entry i.e. the service recipient must be an Industrial Unit, there is no dispute whatsoever. 5.17 Thus, as discussed above, we are of the view that the services provided by SMPK by way of grant of long term lease of land at Taratala Road for a period of thirty years (30 years) for setting up commercial office complex to the applicant, as involved in the instant case, doesn t satisfy all the conditions specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate ..... 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