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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 ..... de to such dissimilar provisions, a reference to the CGST Act, 2017 would also mean reference to the corresponding similar provisions in the SGST Act, 2017. 1. The WBAAR vide order dated 20.12.2023 previously held that the services of leasing of the land for constitution of commercial office complex by SMPK to the appellant 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. 2. Aggrieved by the said ruling given by the WBAAR, Anmol Industries Ltd. (hereinafter referred to as "the Appellant") filed an appeal before the West Bengal Appellate Authority for Advance Ruling (hereinafter referred to as the WBAAAR) where the WBAAAR vide order dated 18.04.2024 has set aside the Advance Ruling Order No. 24/WBAAR/2023-24 dated 20.12.2023 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 29.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 from the end of the recipient. And that from supplier's end, SMPK also fulfils the condition specified in the said entry. 8. As per the said entry, qualification for the benefit of exemption as specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 depends on four major conditions: I. The lease period should be of thirty years or more; II. The property leased should be industrial plots or plots for development of infrastructure for financial business; 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Tax (Rate) dated 28.06.2017 which requires that the lease agreement entered into by the original lessor with the original lessee for lease of such plots 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. Similar Notification No. 1136 F.T. dated 28.06.2017 issued by the Government of West Bengal speaks about incorporation of exemption from payment of State tax in the lease agreement. 14. WBAAR also observed that the copy of the allotment letter issued by the SMPK dated 21.09.2022, as submitted by the appellant during the original stage of hearing, doesn't refer any such exemption from payment 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been referred to. 18. In this context WBAAR observed that when the board of SMPK takes administrative and financial decisions, raises loans, pays salaries and other financial benefits to its employees and retired employees, decides the rate for assets and services available at the port, creates master plan for infrastructural projects, without any intervention from the Central Government, it is rather clear that SMPK is controlled by the Board which is an autonomous body. 19. WBAAR has further referred to the relevant part of the reply given by SMPK which we had mentioned in our earlier order dated 20.12.2023: "Further, as stated in your letter, the clarification regarding ownership of SMPK is required in reference to clause 41 of the notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. In this regard we would 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 ownershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be deemed fit and proper in the facts and circumstances of the case. 25. The instant appeal has been filed by the appellant mainly on the grounds that: i. Regarding fulfilment of the condition 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"- a. 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r availing the benefit of exemption as per the aforesaid entry i.e. the service recipient must be an Industrial Unit, the entire matter now rests on the remaining two conditions: a. Whether the property leased is an industrial plot or plot for development of infrastructure for financial business; and, b. Whether the service provider is 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). 27.2 The appellant's authorised representative also argues that regarding the second condition as to whether the property leased is an industrial plot or plot for development 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Government, State Government, Union territory), the appellant's authorized representative argued that: 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 Section 44 (2) of the Major Port Authority Act 2021 and everywhere in the audit report the regulations of The Ministry of Ports, Shipping and Waterways (MPSW), Government of India has been referred to. Also, from the provisions of the MAJOR PORT AUTHORITIES ACT, 2021, it is clear that the said act has been promulgated for the purposes of administration of the Major Ports in such manner as provided. Further, the web-site of Shyama Prasad Mookherjee Port, Kolkata shows 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 hall 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification No. 12/2017-Central Tax (Rate) dated 28.06.2017 would have been better, even though rendering of final ruling would have remained unaffected. 28.7 In this context, the issue of whether the appellant fulfils the condition of using the property so leased for industrial or financial activity is the substantial condition for claiming the benefit under the above notification and is, therefore, pivotal issue in this case. Condition II of conditions summarized by WBAAR is exactly this condition which WBAAR has held that the same has not been satisfied. 28.8 On being questioned in this matter, although the appellant's authorized representative has made an argument that, by setting up their commercial office complex, all the corporate activities including accounting and financial activities shall be undertaken 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 28.15 It is evident from the definition of 'setting up of a commercial office complex' that land is required to be used for construction of office complex which could be used for own corporate use and excess vacant place could be rented out to other corporate entities conference rooms, guest houses, retail outlets etc. Thus, office complex built on the land leased out would be used for commercial purpose by way of sub-leasing/renting of the available space. 28.16 Para 8.8 mentions specific exclusions which are not permitted to be constructed under the above Notice Inviting Tender. These exclusions are Educational building, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on or soliciting for the purposes of-- (i) buying, selling, or subscribing to, a financial product; (ii) availing a financial service; or (iii) exercising any right associated with a financial product or financial service; (f) establishing or operating an investment scheme; (g) maintaining or transferring records of ownership of a financial product; (h) underwriting the issuance or subscription of a financial product; or (i) selling, providing, or issuing stored value or payment instruments or providing payment services; 28.22 It is undisputed that appellant is not providing any of the above services. Thus they cannot claim to be carrying out financial activity in a financial business area. 28.23 The SAC Codes as per the rate Notifications of GST also specifies Financial Services as follows: 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, guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be equated with mere maintenance of accounts and records by a company or a business concern. 28.25 The appellant is registered under the GST Laws having GSTIN: 19AADCB9169P1ZS. The appellant's business profile and other relevant data as entered by the appellant himself in his registration database available in the GSTN portal specifically states that the appellant is a Public Limited Company having the nature of business of a Factory for Manufacturing and Export. It deals with goods having HSN Code: 19053100 -Bread, pastry, cakes, biscuits and other baker wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products-sweet biscuits; waffles and wafers--sweet biscuits, HSN Code: 19051000 - Bread, pastry, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Shyama Prasad Mookerjee Port is with the Central Government and/or State Government, put together. b. Status of SMPK as a notified person in terms of Notification No. 50/2018-Central Tax dated 13.09.2018. c. Status of SMPK in respect of audit of books of accounts being done annually by Comptroller and Auditor General of India under section 19(2) of the Comptroller & Auditor General's (Duties, Powers & Conditions of Service) Act, 1971 read with Section 102(2) of the Major Port Trusts Act, 1963. 28.32 SMPK, in its reply dated 09.06.2023 and 08.12.2023 respectively, has submitted that: a. The ownership of Shyama Prasad Mookerjee Port, Kolkata is vested upon the Board appointed under the Major Port Authorities Act, 2021 and Central Government is not holding any ownership in the SMPK. [emphasis added] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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