Custom, Excise & Service Tax Tribunal
Inox Air Products Ltd. vs Commissioner Of Central Excise And ... on 24 April, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 215 of 2012
(Arising out of Order-in-Original No. 46-47/KLG (46-47) COMMR/RGD/11-12 dated
03.01.2012 passed by the Commissioner of Central Excise, Raigad)
Inox Air Products Ltd. .... Appellant
Plot No. A-5, MIDC Industrial Area,
Patalganga, Dist. Raigad- 410 220.
Versus
Commissioner of Central Excise and .... Respondent
Service Tax, Raigad 4th Floor, Utpad Shulk Bhavan, Plot No. 1, Sector-17, Khandeshwar, New Panvel- 410 206.
With Service Tax Appeal No. 86205 of 2013 (Arising out of Order-in-Original No. 46-47/KLG (46-47) COMMR/RGD/11-12 dated 03.01.2012 passed by the Commissioner of Central Excise, Raigad) Inox Air Products Ltd. .... Appellant Plot No. A-5, MIDC Industrial Area, Patalganga, Dist. Raigad- 410 220.
Versus Commissioner of Central Excise and .... Respondent Service Tax, Raigad 4th Floor, Utpad Shulk Bhavan, Plot No. 1, Sector-17, Khandeshwar, New Panvel- 410 206.
And Service Tax Appeal No. 85379 of 2014 (Arising out of Order-in-Original No.90/MAK(90)COMMR/RGD/13-14 dated 31.10.2013 passed by the Commissioner of Central Excise, Raigad) Inox Air Products Ltd. .... Appellant Plot No. A-5, MIDC Industrial Area, Patalganga, Dist. Raigad- 410 220.
Versus Commissioner of Central Excise and .... Respondent Service Tax, Raigad 4th Floor, Utpad Shulk Bhavan, Plot No. 1, Sector-17, Khandeshwar, New Panvel- 410 206.
APPEARANCE:
Shri V. Sridharan, Senior Advocate a/w Shri Vinay Jain, Advocate for the Appellants Shri Adeeb Pathan, Authorized Representative for the Respondent 2 ST/215/2012, ST/86205/2013 & ST/85379/2014 CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/85751-85753/2025 Date of Hearing: 28.10.2024 Date of Decision: 24.04.2025 Per: S.K. MOHANTY Brief facts of the case, leading to these appeals, are summarized herein below:-
1.2 The appellants herein, M/s. Inox Air Products Ltd., are engaged, inter alia, in the activities of manufacture and supply of industrial gases as well as in leasing of the equipment of Cryogenic Air Separation Plant (oxygen plant). In the present case, the appellants had entered into a Plant Lease Agreement dated 02.01.2004 with M/s ISPAT Industries Ltd. (for short, 'ISPAT'), for setting up of a 1260 TPD Gas Plant. Further, they had also entered into another agreement dated 05.04.2004 with ISPAT for setting up a 300 TPD Oxygen Plant. Both the plants are to be set up at ISPAT's premises.
1.3 Under the agreement dated 02.01.2004, certain equipment required for setting up of the plant facilities were provided by ISPAT (termed as 'ISPAT equipment' under the agreement). Those ISPAT equipment were provided free of cost to the appellants for setting up of the Gas Plant. The ownership of that equipment always remained with ISPAT and the appellants do not have any interest in the same. Apart from the ISPAT equipment, ISPAT also provides power and water. The site on which the plant is required to be set up is provided by ISPAT. The site consists of a plot of developed land. According to the agreement, the appellants have no interest in the land provided by ISPAT. The appellants only have a right of access to the site to carry out their obligations under the agreement. The rest of the equipment (other than the ISPAT equipment) were procured by the appellants themselves. For the equipment, intended to be procured by the appellants from overseas suppliers, ISPAT took out EPCG licence for importing the equipment under the EPCG scheme and undertook to fulfill the export obligations provided thereunder. In respect of the agreement 3 ST/215/2012, ST/86205/2013 & ST/85379/2014 dated 05.04.2004 for 300 TPD Oxygen Plant, all equipment were provided by appellants, except for the cooling tower, of which ownership lies with ISPAT. The appellants carried out the civil and structural works viz., building, civil foundations, piling structural support and pipe support etc., on behalf of ISPAT.
1.4 The scope of work as per the terms and conditions itemized in both the agreements dated 02.01.2004 and 05.04.2004 for setting up of the '1260 TPD Gas Plant' and the '300 TPD Oxygen Plant' respectively, are almost similar. The only difference between the two agreements is that the terms of the lease under the agreement dated 02.01.2004 is for a period of 15 years from the date of commencement of the lease, extendable for further period of 10 years; it has also been provided that after the date of expiry of the agreement, the appellants shall dismantle and remove the plant, equipment, electrical installations and other facilities belonging to them, within a period of twelve months. In respect of the agreement dated 05.04.2004, the period of lease is for 10 years with the option of extending it for another 5 years; under this agreement, the appellants are required to dismantle and remove the plant within six months of the period of completion of the agreement.
1.5 Both the agreements dated 02.01.2004 and 05.04.2004 provide for the clause that the taxes and duties payable to the Central or State Government in respect of the lease of the plant facilities shall be to the account of and be borne and paid by ISPAT, and if paid for or recovered from the appellants, shall be reimbursed by ISPAT. In terms of the agreements, during the disputed period, the appellants had paid VAT under Maharashtra Value Added Tax Act, 2002, considering the activities as 'deemed sale', on the entire lease rental received by them from ISPAT, which were subsequently reimbursed to them.
2.1 The officers in the Anti Evasion Wing of Service Tax Commissionerate, Mumbai had investigated into the matter with regard to the activities undertaken by the appellants, pursuant to the lease agreements entered into between them and ISPAT. During the course of investigation, the department had verified the books of accounts maintained by the appellants and also recorded various statements from different persons. On detailed investigation into the matter, the department had concluded that the appellants are liable to pay service tax on the lease rental paid by ISPAT 4 ST/215/2012, ST/86205/2013 & ST/85379/2014 under the category of 'Renting of immovable property service', defined Section 65(90a) read with Section 65 (105) (zzzz) of the Finance Act, 1994 (hereinafter for short, referred to as the 'Act of 1994').
2.2 On the basis of investigation, the department had initiated show cause proceedings against the appellants, alleging that the plant set up by them on ISPAT's site includes the building, various machinery, pipes, equipment etc., and the plant is permanently fixed to the earth and therefore, it is an immovable property. According to the department, the plant cannot function unless it is permanently fastened to the earth. In this context, the department had relied upon the definition of 'immovable property', contained in Section 3(26) of the General Clauses Act, 1897. Thus, the department had averred that though the civil works may be substantially damaged while removing the plant, but the fact remains that the plant is immovable. Further, it has also been averred that the plant has not been classified under the Central Excise Tariff Act, 1985 inasmuch as it is in the nature of immovable property and not goods. On the basis of such understanding, the department had concluded that the appellants are liable to pay Service Tax on lease rental charges, under the category of 'Renting of immovable property service'.
2.3 The periodic Show Cause Notices (SCNs) dated 19.04.2010 and 11.10.2011 issued by the department, containing the above allegations were adjudicated upon by the learned Commissioner of Central Excise, Customs & Service Tax, Raigad vide the Order-in-Originals Nos. 46- 47/KLG(46-47)Commr/RGD/11-12 dated 03.01.2012 and 90/MAK/(90) COMMR/RGD/13-14 dated 31.10.2013 (for short, referred to as 'the impugned orders"), in confirming the proposals made in the SCNs. The chart submitted by the appellants containing the details of the SCNs, impugned orders, confirmation of the adjudged demands etc., is extracted herein below:
Appeal No. ST/215/2012 ST/86205/2013 ST/85379/2014 Period of January 2007 to April 2010 to April 2011 to dispute March 2011 March 2011 March 2012 Show cause 19.04.2010 11.10.2011 24.09.2012 notice dated 11.10.2011 Order-in- 03.01.2012 03.01.2012 31.10.2013 Original Demand of Rs.10,04,20,255/- Rs.2,40,21,932/- Rs.1,35,90,586/-
Service Tax (Rs.7,63,98,323/- in respect of SCN
dated 19.04.2010 and
Rs.2,40,21,932/- in respect of SCN
dated 11.10.2011)
5
ST/215/2012, ST/86205/2013 &
ST/85379/2014
Appeal No. ST/215/2012 ST/86205/2013 ST/85379/2014
Interest Not Quantified Not Quantified Not Quantified
Demand
Penalties 1. U/s 76 - Rs.200/- Per 1. U/s 76- Rs. 200/- Per 1. Rs. 10,000/- U/S 77
imposed day or 2% of tax per day or 2% of tax per of the Finance Act,
month, whichever is higher month, whichever is 1994
up to 9.5.2008 in respect of higher subject to 2. Rs. 1,35,90,586/- SCN dated 19.4.2010 maximum of Rs. U/S 78 of the Finance
2. U/s 76- Rs.200/- Per day 2,40,21,932/-in respect Act, 1994 or 2% of tax per month, of SCN dated whichever is higher subject 11.10.2011 to maximum of Rs.
2,40,21,932/- in respect of 2. Rs.5,000/- U/S 77 SCN dated 11.10.2011 Finance Act, 1994
3. Rs.5,000/- U/S 77 Finance Act, 1994
4. Rs.12,00,00,000/- U/S 78 Finance Act, 1994 2.4 In support of confirmation of the adjudged demands on the appellants, the learned adjudicating authority in the impugned orders has inter alia, held that the plant in question cannot be functional, unless those become immovable or permanently fastened to earth; that the plants were erected by use of various civil engineering techniques viz., digging, piling, civil construction, electrical installation etc., to support the immovability and thus, no Central Excise duty liability was discharged by the appellants, considering the same as 'immovable property'; that those plant facilities having been used as immovable property in the course of furtherance of business or commerce, the appellants are liable to pay service tax on renting of such property, under the taxable category of 'renting of immovable property service'.
3. Feeling aggrieved with the impugned orders dated 03.01.2012 and 31.10.2013, the appellants have preferred these appeals before the Tribunal.
4.1 Shri V. Sridharan, learned Senior Advocate appearing for the appellants submitted that for the purpose of 'Renting of Immovable Property Services', the term 'Immovable Property' covers only 'Building', 'Land' and 'Common Areas and Facilities relating thereto'. By referring to the definition contained in Section 65 (105) (zzzz) ibid, he submitted that the legislative intent is to cover only renting of 'land' or 'building' within the ambit of taxable service and that such statutory provision does not include 'plant' and 'machinery'. Thus, he contended that the phrase 'plant and machinery' cannot be considered as 'Immovable Property' for the purpose of levy of service tax thereon.
6ST/215/2012, ST/86205/2013 & ST/85379/2014 4.2 Learned Senior Counsel further submitted that in context with the definition of immovable property service, the phrase 'includes' used in the Explanation clause to such definition would be read as 'means'. Hence, he concluded that when the word "includes" have been designed to construe as 'means', it has to be interpreted that such usage is in the restrictive sense and thus, the said phrase 'includes' cannot go beyond the context of the provision. To support the stand that buildings or lands are already comprised in the ordinary connotation of the expression immovable property, he submitted that by adding the Explanation to the Definition clause, the intention of the legislature is clear that the phrase 'immovable property' cannot be further enlarged to take within its ambit, any other things, other than the land/building. In context with the submission that 'plant and machinery' cannot be considered as 'immovable property' for the purposes of Section 65 (105) (zzzz) of the Act of 1994, learned Senior Counsel has relied upon the judgements of Hon'ble Supreme Court, delivered in the cases of Commissioner of Cus., New Delhi Vs. Caryaire Equipment India Pvt. Ltd. - 2012 (278) E.L.T. 30 (S.C.); South Gujarat Roofing Tiles Manufacturers Association & Another Vs. State of Gujarat & Another - (1976) 4 SCC 601; Reserve Bank of India & Others Vs. Peerless General Finance & Investment Co. Ltd. & Others - (1987) 1 SCC 424; Godfrey Phillips India Ltd. & Another Vs. State of U.P. & Others - (2005) 2 SCC 515; Karnataka Power Transmission Corporation & Another Vs. Ashok iron Works Private Limited - (2009) 3 SCC 240.
4.3 By referring to both the agreements dated 02.01.2004 and 05.04.2004 entered into between the appellants and ISPAT, learned Senior Counsel submitted that the taxable entry of 'immovable property service' was introduced only from 01.06.2007 and since the agreements were entered into and the activities pursuant thereto were carried out much prior to such effective date, it cannot be said that the appellants are liable for payment of service tax under the head of such taxable service. He further submitted that by considering the transactions as 'deemed sale', the appellants had discharged the VAT liabilities and the same was also accepted as due discharge of the tax liabilities by the jurisdictional VAT authorities.
4.4 Learned Senior Advocate submitted that the land on which, the plants 7 ST/215/2012, ST/86205/2013 & ST/85379/2014 are set up belong to ISPAT; that the agreements clearly state that the appellants shall not have any interest in the land, apart from the right of access for the limited purpose of fulfilling the obligations under such agreements. Further, he also pleaded that the economic life time of a plant is 35 years, whereas the term of the agreement is only for a period of maximum 25 years (15 + 10) in case of 1260 TPD plant and similarly the life time is 15 years (10 + 5) in case of 300 TPD plant; thus, the life of the plant is much more than the outer limit of the contract period. He has also referred to the terms of the agreement to state that the appellants are required to dismantle and remove the plant from the premises of ISPAT within a specified period of time. By referring to the above aspects of control over the land, limited contract period and dismantle/removal of plant facilities, learned Advocate strenuously argued that the parties had no intention to permanently attach the plant to the land, rather to provide/ receive the same only for a temporary period, during the validity period of the agreement. In this context, learned Senior Advocate had relied upon the judgement of the Hon'ble Supreme Court in the case of Commr. of C. Ex., Ahmedabad Vs. Solid & Correct Engineering Works - 2010 (252) E.L.T. 481 (S.C.) to state that plant per se is not immovable, but to ensure stability thereof and to keep the vibrant free operation of the plant, the same is being fixed to the foundation and thus, it cannot be considered as 'immovable property'.
5. On the other hand, Shri Adeeb Pathan, learned Authorized Representative appearing for the Revenue reiterated the findings recorded in the impugned order and further submitted that the plants in question are tailor made as per the specification of ISPAT and are practically not usable by some other company, manufacturing the similar and identical goods. He further submitted that the plant installed in ISPAT's site cannot be removed, without making substantial damage to the entire plant. Thus, he pleaded that the submissions made on behalf of the appellants cannot be accepted that such plants after dismantling, can be used by somebody else and that upon movement of the plants in dilapidated conditions from their permanent establishment, will become scrap and will not have any market value. Hence, the learned Authorized Representative submitted that the plant facilities installed on the ISPAT's site are permanent in nature 8 ST/215/2012, ST/86205/2013 & ST/85379/2014 and accordingly, confirming to the definition of 'renting of immovable property', for the purpose of levy of service tax thereon. To support such stand, the learned Authorized Representative has relied upon the judgements delivered by the Hon'ble Supreme Court, in the cases of Quality Steel Tubes (P) Ltd. Vs. Collector of Central Excise, U.P. - 1995 (75) E.L.T. 17 (S.C.); Triveni Engineering & Indus. Ltd. Vs. Commissioner of Central Excise - 2000 (120) E.L.T. 273 (S.C.); T.T.G. Industries Ltd. Vs. Collector of Central Excise, Raipur - 2004 (167) E.L.T. 501 (S.C.).
6. Heard Shri V. Sridharan, learned Sr. Advocate for the appellants, Shri Adeeb Pathan, Authorized Representative of the respondent and perused the case records, including the written note of submissions filed by both sides during the course of hearing of these appeals.
7. The issues involved in these appeals, for consideration by the Tribunal, are as under:
(a) Whether the appellants would be considered as the absolute owner of both the gas/oxygen plants, and whether the lease rentals received by them, would be subjected to levy of service tax under the taxable category of 'Renting of immovable property' service?
(b) Whether, setting up of gas/oxygen plants by utilizing the equipment supplied by both the appellants as well as ISPAT would be considered as 'immovable property', in order to fall within the scope and ambit of 'Renting of Immovable property', as defined under Section 65(90a) read with Section 65 (105) (zzzz) of the Act of 1994 for levy of service tax thereon; especially under the circumstances, when those equipment were removed in the disassembled condition, after closure of the contract period?
(c) Whether the phrase 'immovable property' as per the Explanation 1 appended to Section 65 (105) (zzzz) of the Act of 1994 would cover only the properties itemized therein viz., 'building', 'land' and 'common areas' / 'facilities relating thereto'; or, would it also encompass within its scope and ambit, the other assets i.e., 'plant and machinery', to qualify 9 ST/215/2012, ST/86205/2013 & ST/85379/2014 as 'Renting of Immovable Property Service', for the purpose of levy of service tax thereon?
8.1 It is an admitted fact on record that the equipment listed at Annexure-13 to the appeal memorandum were provided by ISPAT and the equipment as per Annexure-14 were sourced by the appellants themselves. The equipment supplied by both sides to the agreement are crucial and of paramount importance for setting-up of the plant facilities, and in absence of usage of any one's equipment (either ISPAT's or appellant's), the plant as a whole, cannot come into existence for providing the objectives/ required results. Further, the agreements also envisaged that the civil structures like buildings etc., shall be owned by ISPAT and the land on which the plant is set up, also belong to them. Therefore, the appellants are not exclusive owners of the entire plant as a whole, rather they only own those equipment, which are supplied by them for accomplishing the purpose of setting up of the plant facilities. In other words, it can be said that the appellants alone are not the owners of the plant as a whole.
8.2 We find that the learned adjudicating authority has referred to the phrase 'plant', time and again in the impugned order, to conclude that the said plant was leased out by the appellants and the lease rentals received for such leasing should be considered as 'renting of immovable property', for the purpose of payment of service tax thereon. The nomenclature, i.e., 'plant' has been used in the agreement under the generally understood business and commercial parlance. While reading the contents in the agreement, the other constituents of the plant have to be looked into. Since, the plant erected at the site of ISPAT, consists of the equipment supplied by both sides, it cannot be interpreted, without any basis, to hold that the entire plant has been leased out or renting of immovable property service has been provided by the appellants. In other words, mere erection and commissioning of the plant, by utilizing the equipment/components supplied by both sides, do not make the appellants as the sole owner of the whole plant, set up by them. Therefore, we are of the considered opinion that since the equipment supplied by both are involved in setting up of the plant facilities, the appellants alone cannot be treated as the absolute owner, in order to be saddled with the service tax liability for provision of the alleged taxable service under the category of 'Renting of immovable property'.
10ST/215/2012, ST/86205/2013 & ST/85379/2014 9.1 In order to ascertain, whether an article attached to the land can be regarded as the movable or immovable property, the primary and essential requirement is to find out the intention of the parties, who arrive at the conclusion of accomplishing a certain purpose or act. Such objective can be achieved by wholistically reading the entire contents in the agreement, entered into between such parties. In the case in hand, the land on which the plant is set up, belongs to ISPAT. The agreement clearly states that the appellants shall not have any interest in the land, apart from the right of access for the limited purpose of fulfilling the obligations under the agreement. On reading of both the agreements, it would transpire that though the economic lifetime of a plant is 35 years, but in the case in hand, in respect of 1260 TPD plant, the contract period as per the agreement is maximum up to 25 years (i.e., term of lease of 15 years, further extendable up to 10 years); and in respect of 300 TPD Plant, the maximum contract period is 15 years (i.e., initial contract period of 10 years, further extendable up to 5 years). Thus, it is clear that the life of the plant is much more than the period for which the contracts were entered into. The agreement also explicitly provide that the appellants are required to dismantle and remove the plant from the premises within a specified period of time.
9.2 We have examined various documents available in the case file to ascertain the nature, whether movable or immovable, of the both the plant facilities set up by the appellants in the ISPAT's premises. In the affidavit dated 12.06.2012, Shri Praveenchandra Silian, Senior Manager-Indirect Taxation of the appellant's company had sworn that 'the 300 TPD Oxygen plant was a second hand plant dis-mantled and imported from USA to India, and then erected and commissioned at ISPAT'. Further, M/s U.M. Pathak & Co., an approved Chartered Engineer vide his certificate dated 09.01.2013 had also endorsed the fact that the plant is 'second-hand' and imported from USA for the purpose of erection and commission at ISPAT site. Furthermore, the said Chartered Engineering firm in their certificate has also confirmed the fact and situation that 'the plants are not fixed permanently to the earth and is embedded only to give stability and to keep its operation vibration free'. The said firm had also opined in the said certificate that plants can be removed from the site and can be installed at other places without substantial damage. Shri Praveenchandra Silian, in the affidavit executed on 06.09.2019, had also deposed that there have been 11 ST/215/2012, ST/86205/2013 & ST/85379/2014 several instances, where the appellants company themselves had re- located their plants from one place to another. The references of those plants provided in the affidavit dated 06.09.2019, are depicted herein below:
Sr. Plant Details Current Relocated from Year of Remark No. (Capacity) Location capitalisation 1 6 HPN (High INOX factory in INOX factory in the 1999-2000 Shifted in 2003-04 from Tarapur Purity the premises of Jindal to Vashind & is in operation as Nitrogen) premises of Steel, Tarapur on date.
Jindal Steel, Vashind 2 4 HPN INOX factory in INOX factory at 2003-2004 Transferred to our new plant in the premise of Thana A-2 the premises of CEAT Tyres in FY CEAT Tyres, 2017-18 and is in operation.
Gujarat 3 N2O Plant INOX factory at INOX factory at 2003-2004 Shifted in 2016-17 from Patalganga (PG) Thana A-2 Thana to PG. Presently is in operation at PG.
4 45 TPD LIN INOX factory at INOX Jejuri 2010-2011 Shifted in 2016-17 from INOX Liquefier Karjan Factory Jejuri Factory to Karjan -
Presently is in operation at Karjan.
5 600 SM3/Hr INOX factory at INOX Jejuri October Shifted in 2018-19 from INOX Tadipatri Factory 2004 Jejuri Factory to Tadipatri.
6 600 CUM Rathi Ispat Ltd JSPL, Raigad 2004-2005 Shifted in 2004-05 from JSPL to
at Ghaziabad Rathi Ispat Ltd
7 200 CUM Rathi Ispat Ltd Mukund Ltd, Kalwe 2004-2005 Shifted in 2004-15 from
(2Plants) at Ghaziabad Mukund to Rathi Ispat Ltd
Other plants - 300 TPD and Karjan old plant
Sr. Name of Unit Year of Remarks
No. capitalisation
1 INOX factory 1993-1994 This was a second-hand plant which was imported from Germany
at Karjan in the year 1993-94. The said plant is 1978 make which was used having 75 in Germany for almost 15 years. Plant was in operation till Dec TPD capacity 2007.
2 INOX factory 2004-2005 This was a second-hand plant which was imported from USA in the in the year 2004. The said plant was used for 15 years as per Chartered premise of Engineer Certificate. Plant was in operation till April 2017. Ispat Steel Dolvi having 300TPD capacity 3 INOX at 1983-1984 This was a second-hand plant which was imported from Japan in Patalganga the year 1983. The plant was running upto August 2012. having 35TPD capacity 4 INOX at 2015-16 Out of 3 Plants, 2 Nos of 1700TPD plant each of Kobe Make are very Hazira having old and they were installed in Korea and subsequently M/s Essar 1700TPD Steel Ltd, Hazira imported those 2 plants in 2006-07 from Korea (3Plants) and commissioned them in 2011 and operated the same till INOXAP purchased over the running plants from Essar Steel Ltd.
Proposed Relocation Sr Plant Details Proposed Location Current Relocated Date of capitalisation & remarks No Location from
1 10 HPN Upcoming INOX INOX factory in the INOX Thana 1997-1998. The plant shifted factory in the premises of Jindal A-2 factory from Tarapur to INOX Thana A-2 premises of ATC Steel, Tarapur factory for onward transfer to Tires Dahej upcoming plant at Dahej.
2 600 CUM Rizim Ispat Ltd., INOX factory in the 2019. The plant is sold and is U.P premises of Tata being shifted from Kharag Metaliks Ltd Kharagpur (W.B) 12 ST/215/2012, ST/86205/2013 & ST/85379/2014 9.3 The fact of dismantling of the plant from one place to another, has also been stated by Shri R. Yugandhar Babu, Operation Engineer of the appellant's company in the statement dated 13.04.2010, recorded under summon by the department. Pursuant to the query at point No.8, 'whether these plants can be dismantled, without damage?', he had replied that 'there may be substantial damage to the civil works, but machineries can be dismantled without substantial damage...'. The facts explained in the said statement by Shri R. Yugandhar Babu, concur to the affidavits sworn in by Shri Praveenchandra Silian (supra) as well as the certificate furnished by the Chartered Engineer (supra).
9.4 We have also perused the photographs of different plant facilities erected at ISPAT site by the appellants, which were submitted during the course of hearing of the appeals. Sample copies of some of the photographs are captured here under:
13ST/215/2012, ST/86205/2013 & ST/85379/2014 On careful scrutiny of the available photographs in the case records, we are of the considered view that various individual equipment of the plant are erected, installed and commissioned within the premises of ISPAT by way of fastening to the foundation by the help of nuts/bolts and through installation of the base concrete support, which can be dismantled at any time, without causing much damage to the original equipment. Since, those equipment were not permanently attached to the earth, the same in our view, seized to be considered as 'immovable property' and as such, cannot fall under the scope of the definition provided under 65 (105) (zzzz) of the Act of 1994.
9.5 We find that an identical issue about immovability of the plant came up for consideration before the Hon'ble Supreme Court in the case of Solid & Correct Engineering & Ors. (supra). The issue arose in that case for consideration was, whether erection of plant at site would be considered as 'immovable' or 'movable'. By referring to the provisions of Section 3(26) and 3(36) of the General Clauses Act, 1897, the Hon'ble Supreme Court had prescribed the test, through which it can be ascertained, whether the plant is 'immovable' or 'movable'. At paragraph 24 in the said judgement, upon analyzing the factual matrix involved in the said case vis-à-vis the position of law, the Hon'ble Court have prescribed the parameters, when the plant cannot be considered as 'immovable property', which are quoted herein below:
"24. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons :
(i) The plants in question are not per se immovable property.14
ST/215/2012, ST/86205/2013 & ST/85379/2014
(ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer of Property Act.
(iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free.
(iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed."
9.6 Further, various judgements relied upon by the Counsels with regard to the issue of immovability of the plant was also considered by the Hon'ble Supreme Court in the said case of Solid & Correct Engineering & Ors. (supra) and upon consideration of the factual matrix involved therein, had held as under:
"33. It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain moveable or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as moveable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty."
9.7 The ratio of the above judgement is squarely applicable to the facts of the present case. In the present case, the fact that the gas/oxygen plants in question, were not fixed permanently to the earth and are embedded to the earth only for the purpose of providing stability and to keep their operation vibration free, is evident from the affidavits sworn in by the officers of the appellant's company, certificate of the chartered engineer and shifting of the same plants in case of other buyers to another place(s) 15 ST/215/2012, ST/86205/2013 & ST/85379/2014 upon completion of the contract period. Further, it is also an admitted fact on record that the appellants have been paying VAT on the lease rental charges since 2004-2005, before coming into force of the entry of taxable service of 'renting of immovable property'. Since, payment of VAT was accepted by the concerned statutory authorities as due discharge of the liabilities, it would not be prudent on the part of another authority to claim the tax amount under different head, considering the transaction as 'service'.
10. The statutory provisions, relevant for consideration of the present dispute, are reproduced below:
"SECTION 65. Definitions. - In this Chapter, unless the context otherwise requires,-
(90a) "renting of immovable property" includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include -
(i) renting of immovable property by a religious body or to a religious body; or
(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre.
Explanation 1. -- For the purposes of this clause, "for use in the course or furtherance of business or commerce" includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings;
Explanation 2. -- For the removal of doubts, it is hereby declared that for the purposes of this clause "renting of immovable property" includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property;
(105) "taxable service" means any service provided or to be provided, - (zzzz) to any person, by any other person in relation to renting of immovable property for use in the course or 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; and
(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, 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;16
ST/215/2012, ST/86205/2013 & ST/85379/2014
(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 purposes 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;"
11.1 On reading of the above statutory provisions, it transpires that in Section 65(90a) ibid, the phrase 'immovable property' has not been considered to explain, as to which of the properties would fall within its ambit for consideration as the service, under the taxable entry of 'renting of immovable property'. Similarly, in the sub-clause (zzzz) in clause (105) of Section 65 of the Act of 1994, though the activity of renting of immovable property is finding place, but the constituents of the immovable property have not been spelt out therein. However, the Explanation 1 was appended to such sub-clause (zzzz), providing that various properties cataloged thereunder should be considered as 'immovable property'. Normally, an Explanation clause is provided in the statute, with the objective of enabling a clear understanding of the law and to remove any ambiguity in interpreting the same. While reading the Explanation clause, the mandate given in the main section cannot be ignored. Thus, the Explanation itself cannot be construed so as to widen the ambit and scope of the main section/clause. Since, the sub-clause (zzzz) has not provided as to which of the properties would be contemplated as 'immovable', such vacuum was remedied by way of providing the various category of properties for consideration as 'immovable' in nature in the said Explanation 1. In view of the fact that the said Explanation clause has considered only a 'building', 'land', 'facilities relating thereto', in our considered view, no other property can be included therein for consideration as 'immovable property'.
11.2 For bringing about more clarity in Section 65 (90a) and in the sub- clause (zzzz) of Section 65(105) of the Act of 1994, since the Explanation was added, such prescriptions of properties mentioned thereunder should alone be considered for determination as to which are those properties, to be considered as 'immovable'. This is evident from the fact that the Explanation clause commences with the words that 'for the purposes of this sub-clause, "immovable property" includes...'. The phrase 'includes', though 17 ST/215/2012, ST/86205/2013 & ST/85379/2014 is to be considered as extensive in common parlance, but in specific circumstances, the same phrase can be interpreted to read as 'means'. In such scenario, it has to be construed that the phrase 'includes' would be used in a restrictive sense. On careful reading of the above quoted statutory provisions, it would reveal that the phrase 'immovable property' in normal course, was used to be interpreted as 'buildings' or 'lands'. Therefore, no specific categorization was provided in the main statute, which got clarified by way of providing such categorization of property in the explanation clause. Though, the detailed category of properties were elucidated in the explanation clause, by way of insertion of the phrase 'includes'; but certain exclusion category of properties were also carved out therefrom. Thus, the legislative intent is manifest that the scope of the main section for understanding the meaning of 'immovable property', should only be confined to those prescribed properties, which are itemized in the said explanation clause. In other words, any other property(ies) not conforming to the prescribed properties should fall outside the scope and purview of consideration as 'immovable' for the purpose of the Act of 1994. Therefore, we are of the view that the type of properties mentioned in the Explanation
- 1 were intended to be exhaustive and not extendable to any other properties, which are not appearing therein.
11.3 An identical issue involved in the present appeals, about interpretation of the phrase 'includes' mentioned in the explanation clause, whether to be categorized for assigning the meaning of 'extensive, or exhaustive', came for consideration before the Hon'ble Supreme Court, in the case of The South Gujarat Roofing Tiles Manufacturers Association & Anr. Vs. The State of Gujarat & Anr. (supra). The issue involved in that decided case was, whether entry 22 added by the Gujarat Government vide notification dated 27.03.1967 to Part I of the Schedule to the Minimum Wages Act, 1948 would cover 'Mangalore pattern roofing tiles'? The background facts in the said case was about employment in Potteries Industry; the said entry 22 has added an explanation clause, explaining that 'for the purpose of this entry, potteries industry includes the following articles of pottery' (total 9 in nos.). The article i.e., 'Mangalore pattern roofing tiles' was not finding place in the said inclusive category of 9 nos. of articles of potteries. Due to use of the word 'includes' in the explanation clause, the dispute arose between the parties, whether or not to consider 'Mangalore pattern roofing tiles' within the scope and ambit of entry 22 18 ST/215/2012, ST/86205/2013 & ST/85379/2014 (supra). By referring to the well-known use of the word 'includes' in interpretation clauses, the Counsel appearing for the State of Gujarat contended that when the Explanation says that potteries industry 'includes' the nine named objects, what is meant is that it includes not only those objects, but other articles of pottery, including the 'Mangalore pattern roofing tiles' as well. Countering the above arguments placed by the State Government, the Counsel for the other side contended that the articles mentioned in the Explanation were intended to be exhaustive of the objects covered by entry 22; that if the legislature wanted to bring within the entry all possible articles of pottery, then there was hardly any point in mentioning only a few of them by way of Explanation. Considering the rival contentions, the Hon'ble Supreme Court expressed the views, as to how the provisions in the statute must be interpreted. The Hon'ble Court clarified that the word 'includes' is generally used as a word of extension, but the meaning of the word or phrase is extended, when it is said to include things that would not properly fall within its ordinary connotation; that if the objects specified are 'articles of pottery', then these objects are already comprised in the expression 'potteries industries'; that the inclusion in the list of objects which are well recognized articles of pottery makes it plain that the Explanation was added to the entry not by way of abundant caution; that there cannot be inflexible rule that the word 'include' should be read always as a word of extension, without reference to the context. Upon analysis of the legislative intent in adding the word 'includes' in the Explanation clause, the Hon'ble Court vide paragraph 5 in the said judgment, held as under:
".............Though 'include' is generally used in interpretation clauses as a word of enlargement, in some cases the context might suggest a different intention. Pottery is an expression of very wide import, embracing all objects made of clay and hardened by heat. If it had been the legislature's intention to bring within the entry all possible articles of pottery, it was quite unnecessary to add an Explanation. We have found that the Explanation could not possibly have been introduced to extend the meaning of potteries industry or the articles listed therein added ex abundanti cautela. It seems to us therefore that the legislature did not intend every thing that the potteries industry tums out to be covered by the entry. What then could be the purpose of the Explanation? The Explanation says that, for the purpose of entry 22, potteries industry 'includes' manufacture of the nine articles of pottery named therein. It seems to us that the word 'includes' has been used here in the sense of 'means'; this is the only construction that the word can bear in the context. In that sense it is not a word of extension, but limitation; it is exhaustive of the meaning which must be given to potteries industry for the purpose of entry 22. The use of the word 19 ST/215/2012, ST/86205/2013 & ST/85379/2014 'includes' in the restrictive sense is not unknown. The observation of Lord Watson in Dilworth v. Commissioner of Stamps, 1899 AC 99 which is usually referred to on the use of 'include' as a word of extension, is followed by these lines: "But the word 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to 'mean and include' and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions." It must therefore be held that the manufacture of Mangalore pattern roofing tiles is outside the purview of entry 22."
12.1 We find that the learned adjudicating authority in the impugned orders passed by him has referred to various judgements delivered by the judicial forum, to conclude that the plant assembled at site and embedded in the ground, is an immovable property and excisable. Such ratio was drawn by him from the Central Excise statute and applied to the issue in hand, which deals with the provisions of levy of service tax under the Finance Act, 1994 on the taxable service i.e., renting of immovable property. The judgements relied upon in the impugned order were also referred to by the learned AR, as the defense submission for Revenue, during the course of the hearing of the appeals. The reference of those judgements is noted at paragraph 5 above.
12.2 The phrase 'excisable goods' has been defined in Section 2(d) of the Central Excise Act, 1944 to mean, 'goods specified in the Fourth Schedule as being subjected to a duty of excise and includes salt'. An Explanation was added to the said definition clause, providing that 'for the purposes of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable'. In view of the said Explanation, concerning the true essence of the excisable goods, there used to be lot of confusion with regard to consideration of the issue, whether 'plant and machinery' and the structures thereof, since embedded to the earth, can be considered as 'excisable goods'. In the authoritative judgements relied upon by the learned AR for Revenue, the Hon'ble Supreme Court held that plant and machinery permanently fastened to the earth, structures, erections and installations are not excisable goods, since these do not pass the test of marketability i.e., not capable of being bought and sold in the market.
12.3 The issue arise before us for consideration is, as to whether, the concept of 'manufacture' or 'excisable goods' defined under the Central 20 ST/215/2012, ST/86205/2013 & ST/85379/2014 Excise statute can be applied in the case of levy of service tax on provision of a taxable service. The incidence of levy of Central Excise duty is on the manufacture of excisable goods. In the case of service tax, dealt with under the Act of 1994, the incidence of levy comes, when there is provision of service between the service provider and the service receiver. On reading of both the Central Excise statue as well as the Finance Act, it emerges that the levy of duty/tax is entirely on different footings. Thus, in our considered view, the language from one statute cannot be borrowed blindly to interpret the provisions of other statute; especially when there is no ambiguity in reading out the provisions contained therein. Therefore, the ratio in the said judgements relied upon by the learned AR for Revenue, in our opinion, shall not be applicable to the facts of the present case, inasmuch as levy of excise duty is dependent on manufacture of excisable goods, the scenario of which is entirely different in case of levy of service tax, where rendition of service between the persons gives rise to the question of levy of service tax. Therefore, the ratio of the judgements relied upon by Revenue are distinguishable from the facts of the present case.
13. In view of the foregoing discussions and analysis, we do not find any merits in the impugned orders, in confirming the adjudged demands on the appellants. Therefore, the impugned orders are set aside and the appeals are allowed in favour of the appellants.
(Order pronounced in open court on 24.04.2025)
(S.K. MOHANTY)
MEMBER (JUDICIAL)
(M.M. PARTHIBAN)
MEMBER (TECHNICAL)
SM