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TMI Blog2025 (2) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... are specifically excluded from the purview of the Tender. When Industrial buildings itself are not allowed, no stretch of imagination can conclude that industrial activity is allowed under the instant tender. Thus setting up of commercial office complex has a specific purpose and the same cannot be equated to industrial activity. Whether the leased property is used for "financial activity"? - HELD THAT:- The term 'financial activity' is a specific one and cannot be equated with mere maintenance of accounts and records by a company or a business concern. The appellant is unable to satisfy the pivotal points related to the afore-stated second condition, i.e. whether the leased plot is being used for industrial or financial activity in an industrial or financial business area to qualify for the benefit of exemption as specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The appellant is unable to satisfy the afore-stated third condition, i.e. whether the 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, Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 issued by the WBAAR in the case of the appellant and without delving into the merit of the case, remanded the case to the WBAAR for fresh decision after considering all aspects of the matter. 3. In compliance with the order of the WBAAAR, the appellant was heard again by the WBAAR and accordingly Advance Ruling Order No. 06/WBAAR/2024-25 dated 29.07.2024, pronounced by the WBAAR where the WBAAR ruled that "Services by way of grant of long term lease of land by SMPK to the appellant for the purpose of "setting up commercial office complex' as involved in the instant case is found not to be covered under entry 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and therefore cannot be treated as an exempt supply." 4. Aggrieved by the said Advance Ruling Order No. 06/WBAAR/2024-25 dated 29.07.2024, pronounced by the WBAAR, the Appellant has filed this Appeal on 30.08.2024. 5. The appellant, is a company incorporated under the Companies Act, 1956 having its principal place of business at Maity Para, Delhi Road, Hooghly, West Bengal 712311. The appellant had entered into a leasing agreement with the Shyama Prasad Mukherjee Port, Kolkata (hereinafter referred to as SM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trolled by the Central Government, State Government, Union territory); IV. Service recipient must be an Industrial Unit. 9. Now, the first condition regarding lease period of thirty years or more is a settled matter of fact as evident from the allotment letter itself. So, the first condition for availing the benefit of exemption as per the aforesaid entry gets fulfilled. 10. Regarding the second condition for availing the benefit of exemption as per the aforesaid entry, in addition to the fact whether the property leased out is an Industrial plot or plots for development of infrastructure for financial business or not, all other conditions as specified in the aforesaid entry has also to be met in order to qualify for exemption. 11. Such other conditions as further laid down in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended are as follows: "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 orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax. On the contrary, para 3(a) of the said allotment letter specifically mentions payment of applicable GST on upfront premium. Even the Notice Inviting Tender [NIT No SMP/KDS/LND/03-2022 dated 15.03.2022] also speaks as follows: Terms of payment of lease rent:- (i) The successful bidder shall make full payment towards upfront plus taxes [GST and any other tax(es), if in vogue at the material time], security deposit (SD) as well as yearly token rent for the first year @ Re. 1/- per sq. mtr. plus applicable taxes, within 30 days from the date of the offer letter for allotment. [Clause 15(i) of 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 Tax or 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: Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould like to state that SMPK as per their Land Policy, is collecting Lease Rent payable by the Lessee over the Lease Term calculated on Pro-rata basis multiplying by a G-Sec Rate which is not in the nature of Salami, Premium, development charge etc for providing long term lease for more than 30 years. Further, as stated above, as Central Government has no ownership in SMPK since it is an autonomous body, therefore, the upfront amount paid by the lessee at the time 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] 20. Thus, as observed by the WBAAR, 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. 21. Regarding the fourth condition for availing the benefit of exemption as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fundamental issue to be decided was the correctness of such charge of GST, the question of having an exemption clause in the lease agreement/allotment letter doesn't arise at all. b. the second proviso as being relied upon by the WBAAR is for the purposes to provide exemption to any subsequent lease if given by the original lessee during the subsistence of the lease period i.e. to say if the Appellant in the given case sub leases the land to a third person, then the said sub lease would be exempted subject to the terms and conditions that the said original lease agreement should contain the exemption clause. But in this case, both the parties involved are neither sub-lessor or sub-lessee. ii. Regarding non fulfillment of condition regarding SMPK being State Government Industrial Development Corporations or Undertakings or by any other entity having 20 per cent. Or more ownership of Central Government, State Government, Union territory - a. as per the audited financial statement of SMPK it is clear that the audit of the same is done by the C&AG under Section 19 (2) of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of infrastructure for financial business, the WBAAR has restricted their observations to the fourth proviso which states 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". 27.3 He argues that observations on such proviso only implies that the WBAAR has no adverse observation on the other issues related to such condition, such other conditions are now well settled. Further, as his appeal is restricted to the grounds that he has already stated, there is no scope for the WBAAAR to revisit such issues afresh. 27.4 In this context, he argues that the the WBAAR has failed to appreciate the fact that since SMPK had been charging GST and the fundamental issue to be decided was the correctness of such charge of GST, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that SMPK is under the administrative control of Ministry of Ports, Shipping and Waterways, Govt of India, which is a ministry run and controlled by the Central Government and thus SMPK is owned and controlled by the Central Government and the Board of SMPK is formed for the purposes of administrative activities of SMPK. 27.7 He further argues that as SMPK does not hold any share capital and is run by the fund appropriated by the Government, the question of ownership does not stand on the parameter of financial or equity ownership but on administrative ownership. In this case, as per his argument the board of SMPK is constituted of members nominated by the Government and the board has to report its state of affairs to the Government. This implies that SMPK is an entity having more than 20 per cent ownership of the Government and hence the appellant satisfies the third condition also. 28. Discussion and Findings: 28.1 We have carefully gone through the facts of the case and considered the grounds of appeal, the submissions made by the appellant, the documents placed before us by both the parties and the Advance Ruling given by the WBAAR in the instant case. We are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, 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. 28.3 Careful examination of the WBAAR's Order No. 06/WBAAR/2024-25 dated 29.07.2024 reveal that in order to qualify for the exemption as specified in entry 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, there are certain conditions that are required to be fulfilled which the WBAAR has summarised as under: I. The lease period should be of thirty years or more; II. The property leased should be industrial plots or plots for industrial or financial activity in an industrial or financial business area; III. Service provider must be a state Government Industrial Development Corporations or Undertakings or by 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); IV. Service recipient must be an Industrial Unit. 28.4 The WBAAR has observed that out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken and that such office is planned to maintain and monitor all the financial records and transactions of the company which implies that the appellant is using such plot for financial activities. The appellant once again stated that observations made by the WBAAR on such fourth proviso only implies that the WBAAR has no adverse observation on the other issues related to such condition. In this regard, we note that WBAAR has not elaborated on this aspect of condition, though has ruled that this condition is not satisfied by the appellant. 28.9 In this context, the provisions of sub-section (1) of section 101 of the CGST Act, 2017 and the SGST Act, 2017 may be referred to, which are reproduced below: Section 101. Orders of Appellate Authority. - (1) The Appellate Authority may, after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to. [emphasis added] 28.10 Thus, as there is no such statutory restriction, it is very much clear from the statute itself that the WBAAAR can pass orders on the appeal as it deems fit, and can confirm or modify a ruling giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Residential building, Religious Establishment, Political Establishment and Industrial building. Industrial building is defined as, "Any building or structure or part thereof used principally for fabrication, assembly and or processing of goods and materials of different kinds. Such building shall include laboratories, power plants, smoke houses, refineries, gas plants, mills, dairies, factories and workshops". 28.17 Thus Industrial buildings are specifically excluded from the purview of the Tender. When Industrial buildings itself are not allowed, no stretch of imagination can conclude that industrial activity is allowed under the instant tender. Thus setting up of commercial office complex has a specific purpose and the same cannot be equated to industrial activity. 28.18 Now comes the question as to whether the leased property is used for "financial activity". 28.19 The appellant's authorized representative has argued that, by setting up their commercial office complex, all the corporate office activities including financial activities shall be undertaken. He has also argued that such office is planned to maintain and monitor all the financial records and transactions which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Section 7 Financial and related services; real estate services; and rental and leasing services Heading 9971 Financial and related services Group 99711 Financial services (except investment banking, insurance services and pension services) 997111 Central banking services 997112 Deposit services 997113 Credit-granting services including stand-by commitment, guarantees and securities 997114 Financial leasing services 997119 Other financial services (except investment banking, insurance services and pension services) Group 99712 Investment banking services 997120 Investment banking services Group 99713 Insurance and pension services (excluding reinsurance services) 997131 Pension services 997132 Life insurance services (excluding reinsurance services) 997133 Accident and health insurance services 997134 Motor vehicle insurance services 997135 Marine, aviation, and other transport insurance services 997136 Freight insurance services and travel insurance services 997137 Other property insurance services 997139 Other non-life insurance services (excluding reinsurance services) Group 99714 Reinsurance services 997141 Life reinsurance services 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cakes, biscuits and other bakers wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products-crispbread and HSN Code: 33021090 - Mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry; other preparations based on odoriferous substances, of a kind used for the manufacture of beverages of a kind used in the food or drink industries: other. The GSTN database and the appellant's own Portal has no indication that it is engaged in any financial business activity. 28.26 Thus, we find that the appellant is unable to satisfy the pivotal points related to the afore-stated second condition, i.e. whether the leased plot is being used for industrial or financial activity in an industrial or financial business area to qualify for the benefit of exemption as specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 28.27 Regarding the issue of SMPK having 20% or more ownership of Central Government, the appellant has stated that the audit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] b. Further, as per the second proviso of the Major Port Authorities Act, 2021 the Board constituted under the Act shall be a body corporate having perpetual succession and a common seal with power to acquire, hold or dispose of property and may by the name by which it is constituted , sue or be sued. 28.33 Sub-section (3) of section 44 the Major Port Authorities Act, 2021 which deals with "Accounts and audit" says that: (3) The Comptroller and Auditor-General of India and any person appointed by him in connection with the audit of the accounts of the Board under this Act shall have the same rights, privileges and authority in connection with such audit as the Comptroller and Auditor-General of India generally has in connection with the audit of Government accounts and, in particular shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers, and to inspect any of the offices of the Authority. 28.34 Thus, although SMPK is audited by the office of the Comptroller and Auditor General of India, it cannot be conclusively regarded merely on the basis, as per the entry number 41 of Notification No. 12/2017-Central Tax (Rate) ..... 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