Custom, Excise & Service Tax Tribunal
Delhi International Airport Limited vs Delhi South on 8 February, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. II
Date of Hearing: 20.12.2018
Date of Decision: 08.02.2019.
Appeal No.ST/52332/2016-CUS [DB]
[Arising out of Order-in-Original No 10/2016-ST dated 29.04.2016 passed by
Additional Director General, Directorate General of Central Excise Intelligence]
DELHI INTERNATIONAL AIRPORT LIMITED Appellants
Vs.
CGST-DELHI Respondent
Appearance:
Shri Somesh Arora, A.S. Hasija, Advocate for the Appellants
Shri Amresh Jain, AR for the Respondent
CORAM:
Hon'ble Shri Anil Choudhary, Member (Judicial)
Hon'ble Shri C.L. Mahar, Member (Technical)
FINAL ORDER NO._50213/2019
Per Anil Choudhary:
The appeal is directed against Order-in-Original No.10/2016-ST dated
29.04.2016 issued vide F.No.DZU/Adj/DIAL/12/2015/3750 dated 02.05.2016
passed by Additional Director General, Directorate General of Central Excise
Intelligence, New Delhi-110066.
2. The facts leading to the issuance of the impugned order briefly are that M/s
Delhi International Airport (P) Ltd, New Udaan Bhawan, Opp. Terminal-3, IGI
Airport, New Delhi-110037 (hereinafter referred to as DIAL) in pursuance of
privatization process of Ministry of Civil Aviation, entered into an "Operation,
Management and Development Agreement" (OMDA) with Airport Authority of
India (AAI) for Delhi Airport on 04.04.2006 and under the Agreement the
appellant had exclusive rights to undertake some of the functions like operating,
maintaining, developing, designing, constructing, upgrading IGI Airport and to
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perform services relating to aeronautics and non aeronautics. It was their
responsibility to adhere to Master Plan norms of the competent local authority
and the land area utilized of non transfer assets not to exceed 5%, and to allow
any development as per the Civil Aviation Security norms as per Para 2.2.4 of
the said agreement which reads as under:-
"2.2.4 It is expressly understood by the Parties that the JVC shall provide
Non-Aeronautical Services at the Airport as above, provided however that
the land area utilized for provision of Non-Transfer Assets shall not
exceed five percent (or such different percentage as set forth) in the
master plan norms of the competent local authority of Delhi, (as the same
may change from time to time) of the total land area constituting the
Demised Premises. Provided however that the Non-Transfer Assets, if
any, that form part of the Carved-Out Assets and/ or situated upon the
Existing Leases shall be taken into account while calculating the
percentage of total land area utilized for provision of Non-Transfer
Assets."
Same was to be on 30 years lease extendable at the consent of both the
parties.
3. Appellant DIAL under the OMD Agreement, also had at its disposal
vacant land situated at the Hospitality District termed „Aero City‟. For
development of these areas DIAL entered into two agreements one- termed as
„Development Agreement‟, one such detailed agreement with „Silver Resort
Hotel India Pvt. Ltd‟ (SRHIPL) entered into on 26.02.2010 has been submitted
with the appeal memo and the other termed as „Infrastructure Development
and Service Agreement‟ (IDSA) and one such detailed agreement with the
SRHIPL has also been submitted. Similar agreements were entered with 12
other parties, i.e. total 13 parties, as detailed below:-
Asset Area BUA sft Successf Develope Total Date of Date of
s in ul rs infra DA IDSA
area acre bidders deposi
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s ts
1 5.48 650,000 Juniper Juniper 71.50 2.6.2009 2.6.200
Hotels Hotels 9
2 4.69 625,000 AAPC Caddie 68.75 15.6.200 15.6.20
Hotels 9 09
3 5.03 730,000 Blue Silver 60.23 26.2.201 26.2.20
Coast Resorts 0 10
4 4.55 578,000 Aria Aria 63.58 4.7.2009 4.7.200
Hotels Hotels 9
5A 1.58 240,000 Pride Pride 26.40 24.2.201 24.2.20
Hotels Hotels 0 10
5B 1.58 240,000 Sweta Central 26.40 27.2.201 27.2.20
Estates Park 0 10
Infra Dev
6 1.95 232,000 Lemon Hyacinth 25.52 25.5.200 25.5.20
Tree Hotels 9 09
7 2.22 300,000 Bhati Oak 33.00 25.2.201 25.2.20
Realty Infra Dev 0 10
8 2.3 325,000 Bhati Oak 35.75 25.2.201 25.2.20
Realty Infra Dev 0 10
9 1.71 190,000 InterGlob nterGlob 20.90 3.6.2009 3.6.200
e Hotels e Hotels 9
10 1.6 175,000 Bird Bird 19.25 28.5.200 28.5.20
Group Group 9 09
11 3.1 450,000 Bhati Aspen 20.35 29.5.200 29.5.20
Realty Buildtech 9 09
12 1.6 185,000 Wave Wave 20.35 29.5.200 29.5.20
Impex Hospitali 9 09
ty
13 7.7 1,200,0 DB DB 132.00 11.11.20 11.9.20
00 Hospitali Hospitali 09 09
ty ty
Total 45.0 6,120,0 653.13
9 00
The area wise details of each developer with whom
agreements were entered and Allocated „Advance development
cost‟ (ADC) or „total infra deposit‟ received are also given in
the above table.
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As per Article 3 of the Agreement the „Advance development
cost‟ was allocated to various successful bidders by allocating
and working out the same on the basis of Rs.1,100/- per Sq
Ft. of maximum gross built up area.
The said Article 3 reads as below:-
"3.1 Advance Development Cost
1.1.1 The Developer shall pay Dial, a sum of Rs. 1100/-
(Rupees Eleven Hundred) per square foot of the
Maximum GBA on Asset Area 3 in terms of
Development Agreement being Rs. 80,30,00,000/-
(Rupees eighty crores thirty lacs), as an advance
towards development cost (the "Advance Development
Cost"). The Parties agree that DIAL shall not have the
right to escalate the Advance Development Cost for any
reason whatsoever.
1.1.2 The Advance Development Cost shall be payable by the
Developer to DIAL, in three tranches within one year
from the date hereof. The Developer shall pay 50% of
the Advance Development Cost to DIAL, concurrently
with the execution of this Agreement ("First Tranche") in
the manner specified herein.
1.1.3 25% of the Advance Development Cost, shall be
payable within 6 months from the date hereof. The
remaining 25% of the Advance Development Cost shall
be payable by the Developer to DIAL, on or before the
first anniversary of the date hereof.
1.1.4 Subject to Article 6.4 hereof, the Parties agree that any
portion of Advance Development Cost paid by the
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Developer to DIAL, as has not been utilized by DIAL
towards development of any infrastructure Facilities
during the course of the Initial Term, as certified by the
internal auditors of DIAL, shall be returned to the
Developer upon the earlier of the expiry of the Initial
Term or upon termination of Development Agreement in
accordance with the terms thereof.
1.1.5 The Parties recognize and agree that nothing contained
in this Agreement shall confer any title or ownership
rights in respect of the Infrastructure Facilities on the
Developer and any revenues accruing therefrom shall
be solely to DIAL‟s account.
4. The total airport site area covered under OMDA with Airport Authority
of India dtd. 04.04.2006 was 5000 acres, out of which 62.5 acres was allowed
to be developed as "Hospitality District" for commercial development, out of
which 45 acres were earmarked as asset area and leased out to various
developers, in consideration of the license fee, for development under the
"Development Agreements", and the appellant discharged Service Tax on the
said consideration under the category „Airport Service" This issue is not in
dispute. For developing and providing infrastructure facilities in the remaining
area of the "Hospitality District" (other than Asset Area) the appellant entered
into „Infrastructure Development and Services Agreement‟ (IDSA) with each
developer. All the agreements i.e. DA and IDSA with 13 parties were entered
prior 1.07.2010, i.e. the date on which notification No.31/2010 - ST
dt.01.07.2010 came into existence by virtue of which vacant land became
subject of „renting of immoveable property service‟. By virtue of these
agreements the vacant lands (in asset area 3) within Hospitality District were
leased/ licensed to Developers under Development Agreement.
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Certain common areas outside the Asset Area 3, were to be developed and
provided with infrastructure facilities and were to be maintained by the
appellant under „IDSA Agreement‟. In relation to these infrastructure
development facilities, the IDSA agreement provided that DIAL shall be
responsible to provide in Asset Area-3, following common infrastructure
facilities, upon receipt of advance towards development cost, from the
Developer, and payment of maintenance charges:
(i) power supply at 11KW to Developer in Asset Area-3, thereafter
Developer shall be responsible for internal distribution.
(ii) water infrastructure and supply at Asset Area-3 at a single
location,
(iii) Road Network, including peripheral roads, however Developers
shall be responsible for development of all internal roads within
Asset Area-3
(iv) Fire Fighting, DIAL to be responsible for common storage tank
external fire ring main and Hydrants at common area of Asset
Area-3. Developer to be responsible for internal storage tanks
and installation of fire detection and fighting system within
Asset Area-3.
(v) Storm Water Drain along the primary grid road whereas
developer will construct internal storm water drains.
(vi) Common Service Corridor
(vii) Landscaping of common areas outside asset Area -3
(viii) Metro Station Facilities close to the Hospitality District
(ix) 9 Meter corner areas to provide road junction
Identical agreements were entered with different developers for
common facilities. All such developers were paying advance
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Appeal No. ST/52815/2016-DB
development cost to DIAL with a condition to terminate
agreement, in case of facilities not been provided and DIAL was
required to compensate.
All maintenance charges later on separately collected (post
development) were however subjected to payment of tax, which was
duly deposited and the same is not in dispute.
5. Appellant was claiming exemption under Notification No.31/2010-ST dated
22.06.2010. However, the Department was of the view that after amendment
in Airport service w.e.f. 01.07.2010 the classification of the „land development
cost‟ was under „Renting of Immovable Property Services‟ This, as per the
department, was clarified to the appellant on 02/03.05.2012 vide
C.No.IV(16)HQ/Tech/ST/179/2011, in response to clarification sought by M/s
Aria Hotels & Consultancy Services Pvt. Ltd., which was one of the parties to
such agreements with the appellant. Even though the letter itself mentioned
that the issue is being referred to the Board for confirmation of views, but still
the Ld. Commissioner has referred it as the final view of the Department in the
impugned order. However, w.e.f. 01.07.2010 appellant discharged tax liability
on License Fees received by them under Development Agreement with Silver
Resort Hotel India Pvt. Ltd. (SRHIPL) entered into on 26.02.2010. Similarly the
appellant has discharged tax liability on License Fees received by them under
Development Agreement with other parties also. This issue is not in dispute.
Prior to this on 09.07.2007 appellant had sought an opinion from M/s PWC,
which had opined that no service tax was payable on vacant land as it was out
of the ambit of taxable service of „renting of immovable property‟. And same was
not payable on Advance Development Cost also, as development of common
facilities are not for any one exclusive developer, and cannot be considered as
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rent of immovable property or any other contesting service like BAS and Airport
service. The relevant portions are extracted below:-
"3.6. Indirect Tax Implications;
A. Whether grant of right to develop, operate and maintain non-transferable
assets with grant of license in respect of Land can be treated as „taxable
service‟ under service tax regulations?
Under the proposed arrangement, DAPL, will give license of
Land to the licensee with the right to use the said land for specific
purpose of developing, operating and maintaining facilities over the Land.
As a consideration for the license of land development right, licensee
would pay an annual license fee to DAPL. As the transaction is in the
nature of „license of land acquisition of development right, there is
exposure of service tax or VAT to such transaction as explained below:-
Service Tax;
As per service tax law there is no service tax on the right to use
of land. Further, in the Budget 2007 a new taxable category of „renting of
immovable property‟ has been inserted which excludes „vacant land‟ from
its ambit. Therefore the activity of licensing of land by DAPL , to licensee
would not be chargeable to service tax. Also, the activity of grant of
development right is not covered under any taxable category of service.
B. Whether advance received by DAPL from licensees towards development
of basic common infrastructure facilities is taxable to service tax under
service tax regulations?
Given the background that the licensee would pay the advance to DAPL
for development of common infrastructure facilities, such as roads, power,
water and other infrastructure facilities which DAPL is obliged to develop
in terms of its Development Agreement with the licensees, and which
eventually would be used by the said licensees, it is relevant to examine
the subject transaction for service tax exposure.
The relevant taxable categories that need to be considered in
the instant case are:-
a. Renting of Immovable Property Services.
b. Business Support Services
c. Airport Services.
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Appeal No. ST/52815/2016-DB
Following is a brief analysis of the above taxable categories in terms of
their applicability to the instant transaction;
1. Renting of Immovable Property Services; As per the definition of
immovable property service under the service tax law (refer annexure 2
for the definition), this category covers the services of renting, leasing,
letting of an immovable property for the furtherance of business or
commerce. Further, immovable property has been defined to cover
buildings and land appurtenant to these buildings. In the instant case the
common facilities being used are understood to be that of road, power,
water etc which are not in the nature of building/ part of building.
Accordingly, since the facilities being provided do not fall under the
definition of immovable property, no service tax implication would arise
under this category. Further, these services cover renting, leasing, letting
out of immovable property. Renting, leasing, letting out of facilities is an
arrangement wherein an exclusive right is granted for the immovable
property, whereas in this case the various sub-licensees would be using
these common facilities and there would be no exclusive right to anybody.
Since these services are neither for renting, leasing or letting out in
relation to an immovable property, they would not attract any service tax
under the category of Renting of Immovable Property.
2. Business Support Services; As per the definition of support service under
the service tax law, this category covers the services provided for effective
administration of an organization. It specifically includes service of
provision of infrastructural facilities like that of office utilities, lounge,
reception etc. As clarified by the CBEC instruction letter, this is
infrastructural support for providing instant offices along with secretarial
assistance also known as „Business Centre Services‟. The use of common
facilities provided by DAPL to the sub-licensees would not fall under this
category as these facilities are not in the nature of business centre
services. Accordingly, these services are not chargeable to service tax
under the category of business support services.
3. Airport Services; Airport services as defined under the Finance Act, 1994
(refer annexure2 for definition) are any services provided by the airport
authority or any other person authorized by it, in an airport or civil
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Appeal No. ST/52815/2016-DB
enclave. In the instant case DAPL has been given the right to manage the
property which flows from the right given by AAI to DIAL and then by
DIAL to DAPL. Further as per the definition these should be services
provided in the airport. For this purpose it is required to be examined
whether the common facilities are located inside the airport.
The airport has not been directly defined under the service tax provisions.
It is taken to have the sme meaning as is assigned to it by the Airport
Authority Act, 1994, which while defining the term „airport‟ uses the
terms „aerodrome‟ and „aircraft‟ as defined in Aircraft Act, 1934.
Following are the relevant definitions:-
„Airport‟ has the meaning assigned to it in clause(b) of Section 2 of the
Airport Authority of India Act,1994 (Section 65 (3c) of the Finance Act,
1994)
.
„Airport‟ means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of Section 2 of the Aircraft Act, 1934.(Clause (b) of Section 2 of the Airport Authority of India Act, 1994). „Aerodrome‟ means any definite or limited ground or water area intended to be used, either wholly or in part, for landing or departure of aircraft and includes buildings, shed, vessels, piers and other structures thereon or appertaining thereto.(Clause (2) of Section 2 of Aircraft Act, 1934). Combining and relating all the above definitions, the term „Airport‟ would mean to cover the following :-
(i). Runways for landing and taking off of aircrafts.
(ii). Area where aircraft maintenance and passenger facilities are provided.
(iii). Aerodrome i.e an area intended to be used for landing or departure of aircraft and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto.
As we have been made to understand that the area on which the common facilities would be constructed falls beyond the boundary of the airport 11 Appeal No. ST/52815/2016-DB area used for landing and taking off of aircraft, a view may be taken that such area would not be appertaining to the area intended to be used for landing or departure of aircraft covered under the definition of airport as discussed above. Accordingly, the applicability of the category of airport service to the instant transaction can be ruled out.
Based on the above discussion, it may be seen that the advance received by DAPL from the licensees for development of common facilities by DAPL, does not sell under any of the taxable service category, therefore, there is no service tax exposure on the instant transaction.
C. Whether refundable deposits received by DAPL from the licensees for overall development of infrastructure facilities are liable for service tax? The refundable deposits received by DAPL for overall development of infrastructure facilities would not attract service tax liabilities as the basic activity of such development would not attract service tax as per the above discussion.
6. The Office of Commissioner Service Tax, vide letter dated 16.05.2011 in response to inquiry made by M/s Aria, opined that Service Tax was payable on License Fees, for Development Right for the purpose of hotel, but the Opinion given was not final. On another representation by M/s Aria on 11.07.2011 an Assistant Commissioner was deputed on the site, who gave his report on 18.11.2011 indicating that site appeared to be located outside IGI Airport and License fee payable to DIAL was liable to tax. In another letter dated 02.12.2011, the Assistant Commissioner (Technical) stated that tax was required to be paid as „Renting of Immovable Property‟ and not as „Airport Service‟. Another representation, as given in SCN, appears to have been made by M/s CAS Associates on 13/12/2011. Another representation was made by the appellant on 17.01.2012 on the same issue, however the Assistant Commissioner in response, vide letter dated 08.02.2012 opined that License 12 Appeal No. ST/52815/2016-DB Fee is taxable as Airport Service. Another Clarification was received from Dy. Commissioner, Service Tax on 02.05.2012 stating that on re-examination of issue the Department is of the view that the license fee is chargeable to service tax as renting of immovable property services. However, the matter has been referred to Board Office for confirmation. But, no confirmation from Board was received by the Appellants. It is claimed by the appellant that the Development Agreement was duly enclosed by M/s Aria Hotels, while seeking clarification from Chairman CBEC, vide letter dated 11.07.2011. Similarly, letter dated 17.07.2012 to Commissioner, Service Tax clearly indicates that Development Agreement dated 04.07.2009 was duly enclosed. Even the notes to clauses of the Development Agreement, in Notes to Clauses No.1.1.39 clearly refers to and defines „Infrastructure Development and Services Agreement‟, even Para 6.1.2 also has a clear reference to „Infrastructure Development and Services Agreement‟. The relevant portion of the said Para 6.1.2 is extracted below:-
"Provided that the Developer shall, subject to the terms of the „Infrastructure Development and Service Agreement‟, be solely responsible to seek connection of, procure and ensure, at its own cost and expense, the supply of all fuel, consumables and other services and all other utilities required for the construction and operation and maintenance of Assets at Asset Area-3 and DIAL shall not be responsible to provide any infrastructure in relation to any such services and/ or utilities DIAL shall provide reasonable assistance to the Developer in applying for and procuring any such connections for supply of fuel and other utilities."
7. In the meanwhile, DGCEI initiated investigation, whether the element of „Advance Development Cost‟ received from Developers towards development of 13 Appeal No. ST/52815/2016-DB common infrastructure facilities, is classifiable as renting of immovable property services. Department is of the view that only one agreement should have suffice and the advance receipt for specific purposes of developing common facilities under IDSA, should also be included as License Fee. As such services provided or to be provided are in relation to vacant land. After completion of investigations based on facts narrated in preceding paras, Show Cause Notice dated 10.10.2014 was issued by the Additional Director General, DGCEI (Hqrs), New Delhi under F. No 574/CE/41/20/Inv./ Pt.II/11327 dated 10.10.2014. The said Show Cause Notice was adjudicated by the adjudicating authority on contest vide the impugned order wherein demand of Rs. 54,31,68,584/-(Fifty Four Crores Thirty One Lakh Sixty Eight Thousand Five Hundred Eighty Four) was confirmed, interest demanded under Section 75 and penalties under Sections 77 and 78 of Finance Act, 1994 were imposed. Hence the present appeal.
8. Sh Somesh Arora, Advocate, Ms Mehak Gupta and Sh A.S. Hasija, Consultant appeared for the appellant and Sh Amresh Jain, DR, appeared for Revenue.
9. Heard both sides and perused case records, oral and written submissions made and the case laws.
10. The issue before us is whether „Advance Development Cost‟ received from Developers towards development of common infrastructure facilities, is covered under service category of „Renting of Immovable Property Services‟ and whether extended period of limitation can be invoked in the facts and circumstances of the case.
10.1. The definition of renting of immovable property as contained in Section 65(105)(zzzz) is as follows:
14
Appeal No. ST/52815/2016-DB "Taxable services means any services 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; 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;
(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 15 Appeal No. ST/52815/2016-DB 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. We observe that granting of License to the Developer for the Asset Area and Development of Common infrastructure facilities, outside the Asset Area, are two independent and distinct transactions and the same cannot be considered together, so as to constitute a single transaction: The basic nature of two agreements is distinct and the same conferred different rights, obligations and therefore have a distinct scope. From the perusal of these agreements, it is clear that the Development Agreement provided exclusive right and payment of License Fees to develop Hotels etc. on the designated portion or plot of land. The „Infra Development and Service Agreement‟ (Infra Agreement) conferred no exclusive rights but obligation on DIAL to develop common facilities for the various developers, as well as the common public, on payment of apportioned shares of such approx developments cost, outside Asset Area-3, on all Developers. It is seen that there were financial obligations imposed on DIAL in case it failed to provide the facilities, even in future. The Infra Agreement had two components (i) Development of Common facilities (ii) Maintenance of various services, -both are in relation to real estate which were not part of Asset Area-3 and are related to Common and Public Area with no exclusive right being conferred. Under the OMD Agreement entered between the appellant and AAI, appellants had responsibilities to adhere to various construction norms, civil aviation security norms and norms of master plan of Delhi Government and of other agencies. Therefore, even while allowing development rights to developers in allocated development area, as per norms and approved plans, for common areas, it had to perform supervisory role to develop facilities as per approved plans. Since it was the appellant‟s 16 Appeal No. ST/52815/2016-DB responsibility, as a privy to contract under OMD Agreement, to be responsible for operation management and development. In terms of the agreements such common facilities could not have been developed by any developer for everyone including members of public. Therefore, only the appellant was responsible to do the same. It is hard to equate, by any reasoning, development of common facilities with any leased or rental property and such common facilities were never the exclusive right of any developer. As per the Agreement the appellant had to recover such development cost of common facilities from the Developers, as the appellant was providing common facilities as well as plug in facilities in relation to road network, water, power supply, storm water drain etc. and the Developers could have their own internal developments to suit the requirement of their own development of Hotels etc. Further, as per the terms of IDSA no profit was to be made or surplus retained by the appellant, and any excess deposit of the Advance Development Cost was liable to be returned to the 13 parties/ developers after completion of the work. Therefore, no consideration for any purported service has been retained by the appellant. The provision of gross value invoked by the Department under Section 67 of the Finance Act, 1994, for the activities performed prior to amendment of Section 67 w.e.f. May 14, 2015, can not include the value of goods and services, cost of which is only defrayed or reimbursed to the appellant even in advance, in terms of IDSA, The Department has failed to show, if any portion was retained by the Appellant as its remuneration for alleged services provided. Reliance in this regard is placed on 2018 (10) G. S. T. L. 401 (S. C.), in the matter of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. (Para 16, 22, 24, 25 and Para 29). The relevant paras are extracted below;
16. Mr. J.K. Mittal, Advocate, appeared for M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. He argued with emphasis that the impugned judgment of the High Court was perfectly in tune with legal 17 Appeal No. ST/52815/2016-DB position and did not call for any interference. At the outset, he pointed out that the Parliament has again amended Section 67 of the Act, by the Finance Act, 2015 w.e.f. May 14, 2015. By this amendment, explanation has been added which now lays down that consideration includes the reimbursement of expenditure or cost incurred by the service provider. Taking clue therefrom, he developed the argument that for the first time, w.e.f. May 14, 2015, reimbursement of expenditure or cost incurred by the service provider gets included under the expression „consideration‟, which legal regime did not prevail prior to May 14, 2015. Therefore, for the period in question, the „consideration‟ was having limited sphere, viz. it was only in respect of taxable services provided or to be provided. On that basis, submission was that for the period in question, that is covered by these appeals, there could not be any service tax levy on reimbursed expenses, as Section 67 of the Act did not provide for such an inclusion. Mr. Mittal also referred to Para 2.4 of Circular/Instructions F. No. B-43/5/97-TRU, dated June 6, 1997 wherein it is clarified that "...various other reimbursable expenses incurred are not to be included for computing the service tax".
22.Section 66 of the Act is the charging Section which reads as under:
"there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed."
.
24.In this hue, the expression „such‟ occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount 18 Appeal No. ST/52815/2016-DB charged for providing „such‟ taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service, cannot form part of that valuation as that amount is not calculated for providing such „taxable service‟. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider „for such service‟ and the valuation of service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service.
25.This position did not change even in the amended Section 67 which was inserted on May 1, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider.
29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended vide Finance Act, 2015, with effect from May 14, 2015, whereby Clause (a) which deals with „consideration‟ is suitably amended to include reimbursable 19 Appeal No. ST/52815/2016-DB expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under :
A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-a-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law 20 Appeal No. ST/52815/2016-DB passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow‟s backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later."
12. Reliance in this regard is also placed on the decision of this Bench (same composition) in the matter of Premium Real Estate Developers, Rajat Yadav Vs. C. S. T. Service Tax, Delhi, Final Order No.53322-53323/2018 dated
30.09.2013, where the issue before the bench was relating to Advance receipt by the Appellants for purchase of land, Development of Land and Registration of land. The Settlement of the Accounts was still to take place and the exact component of consideration of alleged service received was still to be ascertained. The Department was of the view that advance received by the 21 Appeal No. ST/52815/2016-DB appellant itself was taxable in its hand as per Section 67. Disagreeing with the proposition, and giving relief to the party the bench observed as follows:
'Para 29. We feel that since the specific remuneration has not been fixed in the deal for acquisition of the land we are of the view that both the parties have worked more as a partner in the deal rather than as an agent and the principle, therefore we are of the view that taxable value itself has not acquired finality in this case.
Para 31. As discussed above, since the exact amount of remuneration for providing any services, if any, has not been quantified, at the same time since most of the MOU remained to be fully executed and therefore the exact amount of remuneration, which was the difference in amount paid to the seller of land and average price decided in MoU, could not be finalized and therefore we feel that taxable value has not reached finality and therefore demanding service tax on the entire amount paid to the appellant for acquisition of land is not sustainable in law in view of the discussion in the preceding paras.
Para 32. Further we find that the issue relates to interpretation, and there is no malafide on the part of the appellant. The transaction is duly recorded in the books of accounts maintained by the appellant. Further, there is no suppression of information from the revenue. Accordingly, we hold that the extended period of limitation is not applicable."
13. Reliance in this regard is also placed on the decision of this Tribunal Bench- Chennai, in the case of Commr. Of C.Ex. & S.T, Madurai Vs Sashwath Construction Pvt Ltd-2018 (10) GSTL 273 (Tri-Chennai) wherein it was held-
Construction of Residential Complex Service,-Amount received by builder from allottees under category ‟easement rights‟ for using certain common area- Taxability of-Order of authorities below holding amount being relatable to construction and land value, hence not taxable, sustainable especially when 22 Appeal No. ST/52815/2016-DB Revenue not challenged such finding on merit but only contested that the same is beyond the scope of show cause notice-Amount received for easement rights held not taxable-Section 65 (30)(a) and 65 (105) (zzzh) of the Finance Act, 1994.
14. Development of Common Infrastructure facilities outside Asset Area cannot be construed as „Renting of Immovable Property‟ or a service in relation to the renting of immovable property. The treatment of reimbursement of cost, of common facilities, as „Renting Service‟ by the Adjudicating Authority is not legal because such common facilities were developed by taking advances as a pool of fund, for the infrastructure to be used by common beneficiaries and the account was to be settled as per Agreement by returning excess, if any, or charging deficit, etc. if any, if the cost of the works exceeded or was less than the amount collected as advance. It is common knowledge that rent/lease rent is never subjected to such accounting on real cost basis. It is not in dispute that the maintenance element in future, was the service, on which appellants were duly discharging tax liability alongwith that on the lease rent of the land of Asset Area-3. In fact, such common area facilities were outside the vacant land in Asset Area-3. For rent on immovable property service, the expression „in relation to‟ has to be read in conjunction with the expression „rental‟. The term „rental‟ even in enlarged form of Lease, Rent, Licence, etc., cannot encompass anything done for development of the common facility/ property. There is difference between anything done in relation to „renting of immovable property service‟ and anything done in relation to „immovable property‟ per-se, which is in common domain. The latter cannot fall within the ambit of the former,
15. From the definition of Renting of Immovable Property Services as contained in Section 65(105)(zzzz), (reproduced above), it is evident that in order to be covered under renting of immovable property services, the nature of the activity should be that of renting or letting or leasing or licensing or other 23 Appeal No. ST/52815/2016-DB similar arrangements of immovable property for use in the course or furtherance of business.
A perusal of the definition of the word „renting‟ shows, that the transaction should be under any tenancy, lease, license or any other similar agreement arrangement, whereby an immovable property is given for use to the service recipient. It would be worthwhile to consider the meaning/ definitions of various words namely, rent, lease, license, etc, used in the definition of renting of immovable property. Dictionary meaning of various terms are extracted below;
Renting It is act of letting out or allowing the use to another person. As per Black‟s Law Dictionary, Renting means usually fixed periodical return, especially, an agreed sum paid at fixed intervals by a person for any use of the property or car.
The definition of „lease‟ and „license‟ as envisaged under Section 105 of Transfer of Property Act and Section 52 of the Indian Easement Act, respectively; Section 105 of Transfer of Property Act reads;
"105. Lease Defined-A lease of immovable property is a transfer of right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or anything of value, to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms."
Section 52 of the Indian Easement Act, 1882 reads;
"License Defined--Where one person grants to another, or to a definite number of other persons a right to do, in or upon the immovable property of the grantor, something which would, in the absence of which, be 24 Appeal No. ST/52815/2016-DB unlawful and such right does not amount to an easement or an interest in the property, the right is called license"
Section 105 of Transfer of Property Act,1882 defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of interest in the immovable property. The transfer of interest is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease and it follows from it that the lessee gets that right to the exclusion of the lessor. Whereas under Section 52 of the Indian Easement Act, 1882, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a license. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission his occupation would be unlawful. It does not create in his favour any estate or interest in the property.
In this regard reliance is placed on the decision of the Hon‟ble Supreme Court in the case of C.M. Beena Vs P.N. Ramachandra Rao-(2004) 3 SCC 595 wherein it has been held that lease refers to conferring of a right to possess exclusively coupled with transfer of a right to enjoy the property.
It is evident that the transaction of renting an immovable property includes within its scope the granting of the right to use the immovable property by way of tenancy, lease, license etc. It also includes any other arrangement of similar nature. In order to understand the scope of „any other arrangement of similar nature‟ the rule of ejusdem generis is to be applied. A lucid illustration from Salmond on Jurisprudence Twelfth Edition, page 135, is extracted with advantage;
25
Appeal No. ST/52815/2016-DB "This (i.e the rule of ejusdem generis) however, is only the application of a common sense rule of language. If a man tells his wife to go out and buy butter, milk, eggs and anything else she needs, he will not normally be understood to include in the term „anything else she needs‟ a new hat or an item of furniture"
The words used together should be understood as deriving colour and sense from each other. The rule of ejusdem generis is generally invoked where the scope and ambit of the general words which follow certain specific words (which have some common characteristics and constitute a genus) is required to be determined. By the application of this rule, the scope and ambit of general words which follow certain specific words constituting a genus, is restricted to things ejusdem generis, with those preceding them. To put it differently, the general expression has to be read to comprehend things of the same kind as those referred to by the preceding specific things, constituting a genus. Thus, as per the well known rule of interpretation namely, ejusdem generis, words of a general nature following specific and particular words should be construed as limited to things which are of the same nature as those specified. In other words, the specific words will control the interpretation of the general word, which follow them, By applying the principle of ejusdem generis the general term of „other similar arrangement‟ has to be interpreted in the light of the specific terms used in the definition, namely, renting, letting, leasing and licensing.
16. As discussed above the term „rent‟ means letting out or use by another person usually for fixed periodical return. It cannot encompass Development and Maintenance of common facilities, which was to be defrayed on the basis of actual expense incurred. Again lease involves transfer of rights by transferor to the transferee. In this case, there is no right vested in 26 Appeal No. ST/52815/2016-DB immovable property to be transferred to Developer, again for License a right is required to be conferred to do or continue to do something upon the immovable property of the granter. In this case however, the common area is meant for public use and such immovable property is neither the property of DIAL nor the developer. The road network, metro facilities, etc. are for the general/common use of public and confer any rights, neither on DIAL nor on any Developers. Advance Development Cost is not consideration for any services rendered. In this regard a fine distinction has been drawn by this Tribunal, „As to what amounts to Services having connection with the Renting of Immovable Property and the services which have relation to the construction of building on a vacant land allotted on free hold basis. The latter were held not taxable as they had nexus with the construction of building on the vacant land and therefore, did not attract Service Tax. Reliance in this regard is placed on 2014 -TIOL-1741-CESTAT-DEL in the matter of M/s Greater NOIDA Industrial Development Authority Vs. Commissioner of Central Excise And Service Tax, NOIDA (Para 11.2).
"However, the services like processing and approval of building plan, map revision, malba charges connected with building of structures on the land allotted on lease basis, have no nexus with the renting of immovable property for business or commerce, and as such, the activities in relation to the construction of building on the vacant land allotted on lease basis i.e. the charges of map approval, validation, map revision, malba charges etc. would not attract service tax."
As per case of M/s Greater NOIDA Industrial Development Authority, (supra) the charges collected to undertake various municipal functions like Fire Services, Public amenities, public conveniences including street lightings, parking light, were in the nature of services to be provided by the 27 Appeal No. ST/52815/2016-DB municipalities and were liable to tax under Management Maintenance and Repair Services in respect of charges collected from allottees., even when within specified industrial area and not outside, it was regarded not as „Renting of Immovable Property Service,‟ but as „Management Maintenance and Repair Services‟. Therefore, by no sense of imagination, the Common Area Services outside „Asset Area‟ can be regarded as Renting of Immovable Property Services.
Reliance in this regard is also placed on the matter of RICO LTD. VS. COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I-2018 (10) G. S. T. L. 92 (Tri. Del):
17. We find that there is no Service Provider-Service Recipient relationship between the appellant and the Developers, as regards the Advance development cost, because common facilities developed belong to none (held in trust) and the benefit is derived by all the 13 developers, as well as the public. Hence the same is not liable to Service Tax. It is also an undisputed fact that the appellant was not entitled to retain any portion of advance development cost as its own profit or remuneration for service. The whole cost estimated was apportioned between the 13 Developers @ Rs.1100/- per Sq. ft of GBA (gross built up Area) of construction done by developers in the assets area of 45 acres. The whole Advance Development Cost under the IDSA contract was required to be either spent as per the estimates and excess if any, was to be returned. Since there is only development of common infrastructure facilities involved (as trustee), there is no service flowing from any party to other. The common facilities developed are also outside the asset area which is in the nature of infra development and the same is neither renting of immovable property, nor in relation to renting of immoveable property. Development of common infra outside asset area cannot be said to be in relation to renting of immoveable 28 Appeal No. ST/52815/2016-DB property, as no interest in common area is transferred under IDSA to developer. In fact the services which can be in relation to renting of immoveable property are in the nature of broker services etc., and not infrastructure facilities which become part of immoveable property in common areas. In fact Section 65(105)(zzzz) explanation 1 sub clause 4 includes within the ambit of immoveable property, only such common areas and facilities which are within complex of such estates. The area outside and common facilities outside such area, are certainly not included. Advance development cost is not consideration for any services rendered, therefore, Section 67 has been improperly invoked to take gross value as consideration for alleged services provided, even when whole of the deposit is liable to be spent and nothing retained as per the IDSA agreement. This position stands amply clarified in U.O.I vs. Intercontinental Consultants and Technocrats Pvt. Ltd. - 2018 (10) G.S.T.L. 401 (S.C.). Even in Ahmedabad Management Association vs. Commissioner of Service Tax, Ahmedabad- 2009 (14) STR 171 (Tri. Ahmd) - This tribunal held that a quid pro quo has to be established before levying service tax. Thus the recovery of cost cannot be made liable to service tax.
18. It is settled law that service tax, if any, is not applicable on the Advance Development Cost received prior to 01.07.2010. In the instant case taxable event happened even prior to the date when licensing of vacant land was included in the renting of immovable services w.e.f 01.07.2010. Therefore, taxable event having occurred earlier to the point of levy of service tax, the same cannot be levied. Reliance is placed on:
- (2000) 119 SCC 182 (SC), 20th Century Finance Corporation Ltd. and Anothers vs. State of Maharashtra.
- 2009 (13) STR 159 (Tri. Bom): Bajaj Allianz General Insurance Co. Ltd. vs. CCE, Pune.29
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19. In any case the development of land or common facilities for commercial exploitation and usage by public cannot be termed as Renting of Immovable Property as it is the case of Land Development. Reliance in this regard is placed on 2015 (37) STR 859 (Tri. Del.) as confirmed in 2015 (040) STR J132 (S. C.) in the matter of Alokik Township Corporation Vs. Commissioner of Central Excise and Service Tax, Jaipur-I. (Para 7 and 7.1) :- In which matter construction of sewerage line, laying of underground water supply pipe line or of overhead water tank, construction of dividers and footpath along with plantation were clearly held as activities relating to land development. Number of activities performed in the instant case in relation to land like levelling of land and preliminarily development, boundary wall, construction of road as per norms, landscape garden, construction laying of open and underground drainage, water management, footpaths, construction of tanks, laying of water supply and sewerage pipelines are similar to the activities in the present case. Further the findings of the Ld Commissioner that „ the situation is akin to one where some well known developer of residential land like DLF or HUDA were to charge two amounts for the plots one for the land and the other one for the facilities and amenities like roads, water, sewerage, parks, etc. Obviously, the development charges are part of the charges meant for the land with the specific land use‟. The Ld. Commissioner thereby admits that all development charges are in relation to development of land with common facilities and not for renting. Therefore, based on discussion in the preceding paras, we are of the view that the „Infrastructure development cost‟ as per IDSA is not covered under renting of immovable property and is not chargeable to service tax. a. Second issue on which the appellant has asserted is that extended period of limitation cannot be invoked in the present case and the demand, if any, is time barred. We find that there is nothing brought out on record 30 Appeal No. ST/52815/2016-DB that the appellant had any intent to evade payment of Service Tax on the consideration paid by the Developers for renting, as alleged. In fact the Appellant had paid Service Tax on the consideration being Licence Fees. There appears no suppression as everything was revealed and was available on Balance Sheet submitted to the Department during Audit conducted from July, 2012 to 2013 and also the same were reflected in ST-3 Returns. It is clear that the appellant nurtured a bonafide belief and it involves interpretation The Department was also not clear on the matter, as is clear from various correspondences discussed in the preceding paras.. Reliance in this regard is placed on: 2016 (42) STR 634 (Cal.): in the matter of Simplex Infrastructure Ltd. Vs. Commissioner Service Tax, Kolkata-Extended period not applicable- when assessee is diligent in responding to all notices issued by the Department explaining nature and scope of their business with supporting documents- There was full and sufficient disclosure of nature of assessee‟s business - There was no suppression of material facts to keep Department in dark with deliberate intent to evade payment of Service tax,
- Section 73 of Finance Act, 1994 not invocable. It is settled law that the element of „intent to evade‟ is inbuilt in the expression „suppression‟ - Reliance in this regard is also placed on 2006 (4) STR 583 (Tri. Bang.) in the matter of Elite Detective Pvt. Ltd. Vs. Commissioner, and Religare Securities Ltd. Vs. CST, Delhi as reported in 2014 (36) STR 937 (Tri. Del.): wherein it was held that- the suppression of fact has to be „with intent to evade‟.
b. We note from the facts of the case that it was the appellant who had sought clarification from the Department regarding taxability or otherwise for various services provided by them. On 16.05.2011, Office of Commissioner gave interim reply, stating opinion was not final. On 31 Appeal No. ST/52815/2016-DB 18.11.2011 an Assistant Commissioner after visiting the site gave the opinion that tax was dischargeable as renting of immovable property. Again on 08.02.2012 an Assistant Commissioner opined that „Licence Fee is taxable as Airport Service‟. Lastly on 02.05.2012 Deputy Commissioner of Service Tax on re-examination gave opinion that the alleged service is taxable as renting of immovable property but at the same time the matter has been referred to the Board Office. Till date no clarification from the Board has been received. It is thus clear that the matter involved both physical verification as well as examination of legal issue on which even within the Department different sets of opinion existed. Again, all agreements IDSA and Development Agreement were entered from June, 09 to Feb, 2010 i.e prior to date of lease rent of vacant land becoming taxable Renting of vacant land was brought under service tax net w.e.f. 1.07.2010. Therefore, no tenable assertion can be made that the appellant, with deliberate intent, entered into two sets of agreements on same date, as alleged by the department, thereby ignoring the vital fact that there is a vast difference in nature and activities covered by Development Agreement and IDSA.
c. It is on record that Development Agreement was enclosed by M/s Aria Hotels while seeking clarification from Chairman vide letter dated 11.07.2011 Similarly, letter dated 17.07.2012 to Commissioner, Service Tax indicates that Development Agreement dated 04.07.2009 was duly enclosed. Also the notes on clauses of the Development Agreement, in Clause No.1.1.39 clearly refer to and defines „Infrastructure Development and Services Agreement‟. Therefore, it is not correct that the appellants had not informed or misled the Department about the existence of IDSA. It is on record that all the clarification by M/s Aria and the Appellants were in relation to License Fee of vacant land and that the Legal Opinion 32 Appeal No. ST/52815/2016-DB of PWC dated 09.07.2007 had clearly indicated that the advances received towards Development of basic common infrastructure facilities were not liable to service tax either as „Renting of Immovable Property Services‟ as they do not vest any exclusive right in any immovable property in creation of common facilities or „Business Support Services or „Airport Services‟.Even when „Renting of Immovable Property w.e.f. 01.07.2010, included vacant land, the opinion has remained relevant because no exclusive right stood vested in creation of common facility. d. Again as far as non- taxability of Advance Development Cost is concerned, appellant had acted on legal opinion given by PWC which had clearly opined in 2007 that since what has been developed was infrastructure for common facilities and no exclusive rights has been vested in one or any developer. Therefore, such ADC was not taxable as renting of immoveable property. The reasoning given by the PWC in its opinion dt.09.07.2007 continues to be valid even after amendment in the definition of renting of immoveable property with effect from 1.07.2010, which brought even the vacant land with the scope of renting of immoveable property services. Therefore, we hold that extended period of limitation cannot be invoked in the facts and circumstances of the case in hand.
20. In view of the above, we hold that the impugned order is not sustainable under law and, therefore, is set aside and the appeal filed by the appellant is allowed with consequential relief, if any.
(Order pronounced in the open court on 08.02.2019. )
(C. L. Mahar) (Anil Choudhary)
Member (Technical) Member (Judicial)
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Rekha