Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise & ... vs Mormugao Port Trust on 30 September, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. ST/212, 222/10 (Arising out of Order-in-Original No. 2/Commissioner /Goa/ST/25/09-10 dated 29.01.2010 passed by Commissioner of Customs, Central Excise, & Service Tax, Goa) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) ================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
Commissioner of Central Excise & Service Tax, Goa (in Appeal No. ST/222/2010) Appellant Vs. Mormugao Port Trust Respondent .
Mormugao Port Trust Appellant
(in Appeal No.ST/212/2010)
Vs.
Commissioner of Central Excise & Service Tax, Respondent
Goa
Appearance:
Shri S.B. Gabhawalla, C.A.
for assessee
Shri R.K. Das, Dy. Commr (AR)
for Revenue
CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial)
Honble Mr. C.J. Mathew, Member (Technical)
Date of Hearing: 30.09.2015
Date of Decision: 30.09.2015
ORDER NO
Per: M.V. Ravindran
These appeals are directed against Order-in-Original No. 2/Commissioner /Goa/ST/25/09-10 dated 29.01.2010. Assessee as well as revenue are aggrieved by the order in original hence the appeals are disposed by a common order.
2. The relevant facts that arise for consideration are during the period 01/06/2007 to 28/02/2009, it was alleged that appellant assessee had leased/rented out the Port land to private parties, for carrying out their business activities. It was also alleged that this renting out of the property was falling under taxable category of renting of immovable property services as defined under section 65 (105) (ZZZZ) of the Finance Act, 1994 inasmuch that the access to infrastructural facilities of the board was essential. Coming to the conclusion the show cause notice was issued directing the appellant assessee to show cause why service tax liability be not demanded with interest and penalties not imposed. Appellant assessee contested the show cause notice on merits as well as on limitation. The adjudicating authority after following due process of the law, rejected the contentions raised by the appellant assessee. Adjudicating authority confirmed the demand of service tax with interest and dropped the proceedings initiated for levy of penalties. Appellant assessee is aggrieved by the demand of interest while revenue is aggrieved by non-imposition of penalties.
3. Learned Chartered Accountant after taking us through the records submits that the findings of the adjudicating authority are incorrect. It is his submission that the appellant had given the land on lease which was entirely vacant land and the lease rent which is received is only for the lease of vacant land. He would then draw our attention to the definition of renting of immovable properties services and submit that vacant land is excluded from the scope of the definition and the words immovable property needs to be considered accordingly. He would take us to the lease agreement entered by the appellant assessee and submit that it is for the lease of vacant land. He would submit that the structures on the vacant land are constructed by the lessee and are not the property of the appellant. It is his submission that the appellant charges separately for the facilities like harbour and charges service tax which is paid under the category of Port services. He would draw our attention to the judgement of the Tribunal in the case of Cochin Port Trust - 2011 (21) STR 25, Gujarat Maritime Board 2013-TIOL-2171-CESTAT-AHM, Mundra Port & Special Economic Zone Ltd., - 2012 (27) STR 171 (Tri. Ahmd.) wherein it is held that vacant land/plots which are leased out are non-taxable.
4. Learned Departmental Representative submits that the findings of the adjudicating authority indicates that the appellant had rented out the vacant plot/land for commercial or business activities. He would submit that if the vacant land used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes is excluded from immovable property. It is also his submission that if vacant lands are put to dual use then the exemption is not available. He would also submit that clause (b) be of explanation I will also not be applicable. He would rely upon the judgement of Honourable High Court of Punjab and Haryana in the case of Shubh Timb Steels Ltd- 2010(20)STR 737 for the proposition that renting of immovable property with the retrospective amendment is applicable when there is an aspect of service element in the entire transaction. He would also rely upon the judgement of Honourable High Court of Allahabad in the case of Greater Noida Industrial Development Authority 2015-TIOL-1008-HC-ALL-ST for the proposition that sovereign authority which provides service which is not of a statutory activity and the same is undertaken for a consideration then in such cases service tax will be leviable.
5. We have considered the submissions made at length by both sides and perused the records.
5.1 It transpires that the appellant assessee is port trust and renders the services classified under Port services and discharges service tax liability. During the material period in question, the appellant assessee has leased out vacant land for commercial use by private parties. This activity according to the revenue is covered under the service tax net as renting of property services while it is the claim of the appellant that they had given only vacant land which is excluded from taxable services. It is also undisputed that the appellant assessee has entered into long term lease agreement with the private parties. The private parties on execution of lease agreements, utilised the vacant land for commercial purposes by constructing various temporary as well as permanent structures. We have perused the lease agreement entered by the appellant assessee. The said lease agreement is annexed at Annexure D in the appeal of assessee appellant. We find that the terms and conditions of the lease agreement which is entered by the appellant assessee, as state government undertaking, contains standard clauses. We find that the appellant assessee had leased out land area and water area for the use of the lessee and granted permission to him for construction of dry dock, jetty for commercial exploitation. We find from the records that appellant assessee had given vacant land to the lessee.
5.2 On the above reproduced factual matrix we now have to consider whether such an activity of leasing of vacant land would fall under service tax net as claimed by the revenue. We need to consider the definition of the taxable service during the material period which reads as under.
Taxable Service Defined under Section 65(105)(zzzz) Taxable Service means any service provided or to be provided (to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or, for furtherance of, business or commerce) Explanation 1. For the purposes of this sub-clause, immovable property includes
(i) building and part of a building, and the land appurtenant thereto;
(ii) land incidental to the use of such building or part of a building;
(iii) the common or shared areas and facilities relating thereto;
(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, and
(v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce;
but does not include-
(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
(c) land used for educational, sports, circus, entertainment and parking purposes; and
(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
Explanation. 2 - For the purpose of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce.
It can be seen from the above reproduced definition that renting of property is taxable service from 1/6/2007. We are concerned with the exclusion clause in the definition under explanation I. Exclusion clause (b) will directly apply in the case in hand. It is undisputed that the land which has been leased out by the appellant is vacant. The said exclusion does not envisage any restriction as to it is to be put for non-commercial use. In our considered view the appellant assessee having leased out the vacant land and the water front, is covered under the exclusion provided in the definition. We find strong force in the contentions raised by the learned Counsel that in the case of Mundra Port & Special Economic Zone Ltd. (supra) in paragraph number 17 and 19 the Tribunal has on similar issue held such leases or not taxable. We reproduce the relevant paragraphs.
17.?As against above, the Commissioner has observed that in case, only vacant land is provided by the noticee under such agreement along with facilities like electricity, road, etc. the same may not amount to providing of infrastructure support for commerce or business. However, if more facilities which either individually or collectively be said to be supportive to the commerce or business of the second party are involved, the same would fall under business support services. As such, by examining each and every agreement, he has confirmed the demand in respect of six agreements.
It is seen that the various activities held by the Commissioner having been provided under the business support services are in relation to Dredged channel, Marine and port facilities, access to main road, usage of Railway, use of existing basic telecom infrastructure, drainage and sewerage lines, tapping point for electrification and providing of other already available facilities. Nevertheless, we note that the agreements are basically and primarily for allowing the use of the vacant plots so as to have access to their area of work. Admittedly, the basic facilities for use of said vacant plots are required to be provided by the appellants. The same cannot be held to be covered by the business support services. We find that no justifiable reasons for the Commissioner to drop the demand in respect of nine parties and to confirm in respect of six agreements where the agreements were basically for providing vacant land for use of the same. The threadbare examination of the agreements, whereas in some cases along with identical facilities, some more might have been provided was not called for.
19.?Inasmuch as admittedly in the present case, it is use of the vacant land, which stands provided by the appellants to various lessees along with the facilities, the same would not fall even within the taxable services of rent of immovable property. The demand on this count is accordingly not sustainable. The same is accordingly set aside along with setting aside of consequent interest and penalty. 5.3 We find that the judgement of the Tribunal in the case of Gujarat Maritime board (supra) in paragraph number 9 the bench held as under.
9. In essence, the service rendered by GMB is one of grant of a licence to use the waterfront at the minor ports over which the State Government has a sovereign right. Such service, without any other attendant service for handling the vessels or goods, cannot be considered to be a prot service. Such a service is akin to the service of renting of an immovable property but that has nt been the case of the Revenue at any stage. Even if the taxable sentry of renting of immovable property had been invoked, no tax would have been payable at least till 2010 as renting of a vacant land was expressly kept out of tax net till 2010. 5.4 It can be seen from the factual matrix of the case in hand as also the ratio of the judgements, the activity of leasing out vacant land will not be covered under the category of renting of immovable property.
5.4 The appeal filed by the revenue is also of no consequence as on merits we find that the issue is covered in favour of the appellant assessee as recorded by us hereinabove.
5.5 In view of the foregoing, in the facts and circumstances of this case we hold that the impugned order to the extent it is contested by the appellant assessee is liable to be set aside and we do so. To the extent it is contested by the revenue is to be upheld and we do so.
6. In sum, we allow the appeal filed by the assessee and reject the appeal filed by the revenue.
(Dictated in Court) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) nsk ??
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1 10Appeal No. ST/212, 222/10