Custom, Excise & Service Tax Tribunal
J N Investments & Trading Company ... vs Additional Director General ... on 11 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 4
Service Tax Appeal No. 52875 of 2019
(Arising out of Order-in-Original No. 39/2017-CE dated 31.10.2017 passed by
the Additional Director General (Adj.), Directorate General of GST Intelligence
(Adjudication Cell), New Delhi)
M/s J.N. Investments & Trading Company Appellant
Private Limited
Wind World Towers, Plot No. A-9,
Veera Industrial Estate,
Veera Desai Road, Andheri West,
Mumbai, Maharashtra-400053.
Versus
Additional Director General (Adjudication), Respondent
New Delhi
Directorate General of GST Intelligence
(Adjudication Cell), West Block VIII,
Wing No. 6, 2nd Floor, R.K. Puram,
New Delhi - 1100066
And
Service Tax Appeal No. 50197 of 2020
(Arising out `of Order-in-Original No. 39/2017-CE dated 31.10.2017 passed by
the Additional Director General (Adj.), Directorate General of GST Intelligence
(Adjudication Cell), New Delhi)
M/s Vish Wind Infrastructure LLP (VWILLP) Appellant
Wind World Towers, Plot No. A-9,
Veera Industrial Estate,
Veera Desai Road, Andheri West,
Mumbai, Maharashtra-400053.
Versus
Additional Director General (Adjudication), Respondent
New Delhi
Directorate General of GST Intelligence
(Adjudication Cell), West Block VIII,
Wing No. 6, 2nd Floor, R.K. Puram,
New Delhi - 1100066
Appearance:
Present for the Appellant: Ms. Aarya More, Advocate
Present for the Respondent: Shri Mihir Ranjan, Special Counsel
CORAM:
Hon'ble Dr. Rachna Gupta, Member (Judicial)
Hon'ble Mr. P.V. Subba Rao, Member (Technical)
2
Date of Hearing : 13/03/2025
Date of Decision : 11/07/2025
Final Order Nos. 51002-51003/2025
Dr. Rachna Gupta:
The present order disposes of two appeals arising out of same
Order-in-Original and appellant being the two companies of same
Group of Companies. The details of both the appeals are as
follows:
Appeal No. Name of SCN No. O-I-O No. Amount of
appellant ` demand
confirmed
ST/52875/2019 M/s J.N. 574/16912 39/2017-CE 1,92,81,451/-
Investments & dated dated With penalty of
Trading 20.10.2015 31.10.2017 equal amount
Company
under section
Private Limited
78(1)
ST/50197/2020 M/s Vish 574/16912 39/2017-CE 1,92,81,451/-
Wind dated dated With penalty of
Infrastructure 20.10.2015 31.10.2017 equal amount
LLP (VWILLP) under section
78(1)
Also the Penalty of Rs. 7,000/- under Section 77(1). No penalty of
Section 78A has been ordered to be imposed on Shri Yogesh
Mehra.
2. The facts relevant for the disposal of these appeals are:
2.1 M/s Vish Wind Infrastructure LLP (herein referred as VWILLP)
is a Limited Liability Partnership 1 and M/s J.N. Investments &
Trading Company Private Limited2 is a company incorporated under
the Companies Act, 1956. Both these appellants are having their
1 LLP
2 (hereinafter referred as JNITCL)
3
registered office at Wind World Towers, Veera Industrial State,
Andheri, Mumbai. Both of the appellants have been floated by M/s
Wind World (India) Ltd. (hereinafter known as WWIL) which was
earlier known as M/s Enercon (India) Ltd. (hereinafter referred as
EIL), to be engaged in carrying out various activities for
facilitating the setting up of wind energy projects. VWILLP is
floated for acquiring, purchasing, selling or otherwise dealing with
approvals, allotments etc. for wind power projects including
identification of potential wind sites after undertaking power
evacuation and related feasibility studies; carrying out land and
contour services; micro siting, wind motoring, collection and
analysis of data to undertake project planning, costing and
feasibility studies. Thus VWILLP undertakes various activities of
extensive research for wind Power Projects.
2.2 The another appellant JNIPL was incorporated to establish
wind farms for electricity generation and to carry on the business
as lessors, sub-contractors and consultant of wind energy
projects on the basis of wind assessment studies, Geo-technical
service, various studies in India which have the requisite ventures
in terms of terrain, wind patterns, requisite plant load factor and
power evacuation etc. Thus possibilities for commercially
viable sites for setting up wind energy projects across
subject to the results of the aforesaid preparatory work
used to be explored by both the appellants. The company
which floated both the appellants i.e. EIL/VWIL is simultaneously is
engaged in the business of development, for third parties, of
infrastructure facilities, utilities and wind resources that are
4
required for setting up and running of wind power projects and they
also act as consultant to render technical and infrastructural
services in connection therewith.
2.3 Directorate General of Central Excise Intelligence, New Delhi
received an intelligence that VWILLP and JNIPL, floated by the
promoters of EIL/WWIL were indulging in evasion of service tax.
While investigating, department observed that both the appellants
were providing project related services to EIL/VWIL in the guise of
sale of Developmental Rights (hereinafter referred as DRs). It was
alleged that there was no sale involved in the impugned
transactions and services only were provided by both the appellants
to EIL/VWIL. During further investigation, and based on the
outcome of search dated 17-18/09/2013, the department got to
know that EIL/VWIL used to provide complete end to end solutions
and services to their customers/third parties for setting up of wind
mills/wind farm projects on „Turnkey Basis‟ including supply,
development and setting up of wind mills/wind farm projects as a
complete package. Various such contracts were perused by the
department. From the perusal of those contracts, department
formed the opinion that the activities required for getting
allotments and approvals and ensuring viability of sites for
development and setting up of wind mill/wind farm projects
were also included in the composite work contracts entered
into by EIL/WWIL with their customers. Even the price of
Developmental Rights was found included in the negotiated
price between the customers and EIL/WWIL.
5
2.4 While conducting search in the premises of both the
appellants and perusing the documents as got recovered,
department observed that appellants had transferred the project
„Approvals‟, as were obtained after conducting various activities and
„Allotments‟ of land, referring them to be Developmental Rights to
EIL/WWIL vide on agreement dated 22.09.2010 to enable
EIL/WWIL to set up wind farms in the State of Rajasthan,
Karnataka and Gujarat to M/s EIL/WWIL against consideration vide
Debit Note No. 1 dated 22.9.2010 for the amount of Rs.
194,14,00,000/-. The department observed from the debit note
that though the appellants were obtaining DRs for setting up
of wind farm but were getting the funding for the same from
EIL/WWIL. Department formed the opinion that the appellants
were acting on behalf of the EIL/WWIL for setting up of the mega
wind farm projects. As also got supported from the Valuation
Analysis Report dated 19.9.2010 about the valuation of the
so called Development Rights. From the perusal thereof,
department re-confirmed the observation that most of the activities
which are required for setting up and successful development of
Wind Power Sites by EIL/WWIL are being done by the appellants,
for EIL/WWIL.
2.5 Department further observed that the agreement dated
22.9.2010 for transfer of project „Approvals and Allotments‟ as was
executed between EIL/VWILLP and VWILLP. Similar agreement
dated 11.3.2011 was executed between EIL/WWIL and JNITCL. In
these agreements it is mentioned that EIL/WWIL had agreed to
pay the „Purchase Consideration‟ to the appellants qua
6
unconditional and irrevocable transfer of "Approvals and Allotments‟
procured by the appellants. However, department observed from
the said Valuation Analysis report dated 19.9.2010, alleged that
what was transferred to EIL/WWIL under the name of
Developmental Rights are various activities/services performed by
the appellants for EIL/WWIL i.e. the activities which were required
by EIL/WWIL for setting up developed wind farms. Thus
department alleged the transaction between EIL/WWIL and
both the appellants vide respective agreements is that of
providing 'Business Support Services' under the guise of,
sale of DRs. It is also alleged that all the activities
mentioned in Valuation Report were intentionally concealed
in the agreements dated 22.9.2010 and 11.3.2011 with an
intent to hide true nature of the transactions so as to evade
the payment of service tax; 'Business Support Service'
being a taxable service.
2.6 With these allegations, the show cause notice, as mentioned
in the table above was served upon both the appellants proposing
the recovery of such amount of service tax along with interest and
such penalties as are already mentioned in the said table. The said
proposal has been confirmed vide impugned Order in Original dated
31.10.2017, as already mentioned in the table above. Being
aggrieved, the appellant is before this Tribunal.
3. We have heard Ms. Aarya More, learned Advocate and Shri
Mihir Ranjan, learned Special Counsel for the Revenue.
7
4. Learned counsel for the appellant submitted that the
appellants are the commercial entities engaged in acquisition of
„Development Rights‟ and undertake the requisite procedural and
regulatory compliances necessary for the establishment of wind
farms including obtaining governmental approvals from designated
nodal agencies. It is submitted that the allegations leveled against
the appellants that they were providing „Business Support Service‟
to EIL/WWIL are absolutely wrong. It is submitted that the
appellants were not rendering any taxable service to EIL/VWIL but
were merely undertaking self-supply for acquiring DRs which falls
outside the ambit of taxable transactions. Having obtained
requisite „Governmental Approvals‟ and acquired Exclusive Right for
the development of wind farms and power evacuation
infrastructure, these approvals and allotments constitute the
Development Rights which were actually transferred to EIL/WWIL
on principal to principal basis without any agency relationship
between the appellants and EIL/WWIL. It is apparent from the
facts on record that those „Allotment and Approvals‟ were obtained
in the name of the appellants and were sold and transferred to M/s
EIL/WWIL that too after several years of acquisition vide respective
agreements i.e. of dated 22.09.2010 and of 11.03.2011 against the
purchase value as consideration of sale. These Development
Rights were procured after following due processes by the
appellants, in their independent capacity, commercial
discretion while engaging with nodal agencies exclusive for
regulatory approvals.
8
4.1 Learned counsel further submitted that under wind power
policy of the government the applications for setting up wind power
project are to be invited from the developers. Post scrutiny of
those applications, government issues „Government Orders‟ ear-
marking area in favour of the specific project developer providing
the exclusive right to the developer for the area ear-marked
for setting up of wind power project. Under the said policy, the
appellants, being such a developer, got exclusive rights to conduct
wind studies, acquire land, develop wind power infrastructure and
set up wind power projects. Since all such activities require few
years of time, the appellants being entitles specializing in such
activities obtain development rights by conducting wind studies and
such other activities for the wind potential area and retained those
DRs with themselves in their own name. Thus, the appellants were
the true legal and beneficial owner of all approvals and allotments.
However, the appellants unconditionally and irrevocably transferred
those „Approvals and allotments‟ along with the right to set up the
wind farms based on those DRs to EIL/WWIL by way of sale
agreement dated 22.9.2010; and 11.03.2011 with the intent that
EIL/WWIL shall be the full an absolute legal owner of those
Development Rights with all rights title and interest to develop and
exploit all those „Approvals and Allotments‟, the development
rights, in its name as a purchaser. The agreements clearly do not
create principle-agent or service provider-service recipient
relationship. The said agreements dated 22.9.2010 and
11.03.2011 have absolutely been ignored by the original
adjudicating authorities.
9
4.2 Learned counsel further submitted that DRs are nothing but
„Goods‟ and the sale/transfer of title in goods or immovable
property is outside the purview of service tax. The „Approvals and
Allotments‟ in the transactions are the benefits arising out of land
having the Wind Potential meant for setting up of wind mill/farm
hence are the saleable title of said land/immovable property. Thus
the service tax demand has wrongly been imposed on the amount
of „Purchase Consideration‟ received by the appellants while
transferring the DRs related to immovable property to EIL/WWIL.
4.3 Learned counsel further impressed upon the definition of
„Business Support Services‟ given under Section 65(104C) of
Finance Act, 1994 and impressed upon that the definition seeks to
cover services which are auxiliary, ancillary, and in support of the
business of the client. The list of services given in the
provisions clearly indicates that the activities which are of
the nature of outsourced services are sought to be covered
under the aforesaid taxable head. It is mentioned that the
appellants are not undertaking any of those specified activities.
Above all, the transaction has been undertaken on Principal to
Principal Basis. Further, reliance on the definition of service given
under Section 65B(44) of the Finance Act has also been laid to
impress upon that any activity which constitute a transaction in
money or actionable thing or an activity of transfer of title in goods
or immovable property by way of sale, or in any other manner shall
not be included in the said definition of service. Since the benefits
arising out of land are also immovable property by virtue of Section
3 sub-section 26 General Clause Act, the impugned transaction of
10
transfer of DR‟s is out of the scope of the definition of service given
under Section 65B(44) of the Act. Learned counsel has relied upon
the decision of this Tribunal in the case of DLF Commercial
Projects Corporation Vs. Commissioner of ST, Gurugram3.
4.4 The following decisions have also been relied upon:
(i) Sadodaya Builders Private Ltd. Vs. Jt. Charity
Commissioner4;
(ii) Amit Metaliks Limited Vs. Commissioner of CGST,
Bolpur5;
(iii) Rajasthan State Mines & Minerals Ltd. Vs.
Commissioner of Central Excise & ST, Jaipur6;
(iv) Chheda Housing Development Corporation Vs. Bibijan
Shaikh Farid7.
In these decisions the „Approvals/Allotments from the state
Governments/nodal agencies are collectively held to be called as
Developmental Rights and the transfer thereof is held to be
amounting as sale of the immovable property. The decision in the
case of Fakir Chand Gulati Vs. Uppal Agencies Pvt. Ltd.8 has
also been relied upon, to impress that in case of joint venture there
is neither any intention to render a service to other nor is there any
consideration fixed as a quid pro quo for a particular service to a
partner. Hence the contractor and contractee or the principal and
agent relationship which is an essential element of any taxable
service is absent in the relationship amongst the partners/co-
ventures or between co-ventures and the joint ventures. With
these submissions, it is submitted that service tax liability has
3 2019 (27) GSTL 712
4 (MANU/MH/079/2011
5 2020 (41) GSTL 325 (Tri.-Kol.)
6 2020 (35) GSTL 561 (Tri.-Del.)
7 2007 (2) Bom CR 587
8 2008 (12) STR 401
11
wrongly been confirmed against the appellants. The order under
challenge is accordingly, prayed to be set aside and both the
appeals are prayed to be allowed
5. Learned Departmental Representative, while vehemently
objecting all the submissions put forth by the learned counsel for
the appellant, has submitted that the appellants have wrongly
claimed that the activities such as feasibility study and obtaining of
approvals were merely for appellant themselves/self supply. It is
submitted that due to existing regulations, the areas where Wind
Turbine Generators (WTG) can be set up, must be approved by the
Government/Regulatory Body as setting up of WTG depends upon
various factors including respective authorities development plan
for energy in that area, prevailing infrastructure for evacuation of
the energy feasibility and viability on a particular site etc.
Therefore, the approvals and allotments for setting up wind farm on
a particular site is not just the right to develop the specific site as
wind farms but it is an outcome of several activities being rendered
by the appellants.
5.1 Learned Departmental Representative led emphasis on the
fact that once an entity acquires approvals and allotments for a
particular site from the respective governmental authorities, only
that entity, its assignee or transferee of these rights is allowed to
set up WTG in that area without transferring the same to any one
else. The said fact was duly acknowledged by Shri S.B. Patil,
Deputy Director of M/s Gujarat Energy Development Agency in his
statement dated 10.2.2015 as was recorded under Section 14 of
Central Excise Act, 1944 read with Section 83 of the Finance Act
12
1994. Similar statement of engineer (R&C) of M/s Gujarat Energy
Transmission Corporation Limited is on record. Based on those
statements department had alleged that the term Development
Rights as mentioned by both the appellants in the agreements with
EIL/WWIL is nothing but a strategy to camouflage the transactions
of providing services for the development of wind farm projects
that too with an intent to evade service tax.
5.2 Learned Departmental Representative further led emphasis
upon the Valuation Report from valuation consultant M/s Morison
Ltd. as was got prepared to arrive at a fair price for the transfer of
such Development Rights to EIL/WWIL, who has utilized these
rights for setting up of wind farm for their ultimate customer/third
parties. It is alleged that the agreement dated 22.9.2010 and
11.03.2011 do not indicate the correct nature of the transaction.
The correct intent of both the appellants is of providing support
services to M/s EIL/WWIL. Reliance is placed on the decision of
Hon‟ble Apex Court in the case of Sundaram Finance Ltd. Vs.
State of Kerala9. Learned Departmental Representative further
submitted that DGCEI‟s investigation revealed WWIL/EIL project
scope for their customers/third parties included the following:
(a) To procure Wind Turbine Generators 10 , the necessary
transformer, and all ancillary and incidental equipment for said
WTGS.
(b) To perform civil and industrial works, including construction
of the sending station, interconnection facilities, foundations, and
9 MANU-0299-1965
10 WTGs
13
internal roads for the WTGS, as well as supply and erection of
internal lines for the project.
(c ) To provide installation and commissioning of the WTGS,
including assembly and erection of WTGS, Grid interfacing, testing
and commissioning of WTGS at the site.
(d) To acquire project land for installation, erection, and
commissioning of WTGS at the site per the terms and
conditions of this Agreement, subject to applicable law.
(e) For completing all legal requirements for the
installation, erection, Commissioning, and commencement
of the operations of a lot or the project, as the case may be,
including obtaining all land leases, permits, authorization
approvals, and contracts
From the above scope of work, it is evident that EIL/WWIL
has undertaken "composite works Contract" for the supply of the
equipment of WTGs and the various services required for the
development and setting up of the wind mill project/wind farm,
including erection, installation and commissioning of such mills on a
turnkey basis. The necessary activities required for the
development and setting of these wind mills include activities for
acquiring of requisite approvals and allotments were done by the
appellants VWILLP/JNIPL. Documentary evidence unearthed
during the investigation revealed that EIL had the facility to
manufacture wind turbines, and VWILLP/JNIPL had the
required experience and infrastructure to set up the wind
farms. Thus it was concluded that the appellants acted on
14
behalf of EIL/WWIL to facilitate them by creating the
infrastructure and providing the necessary support and
assistance by completing the essential formalities and
obtaining the required approvals and permissions from the
various governments/state nodal authorities that are
essential for setting up wind farms, EIL/WWIL helped them
financially. Thus, both the appellants were actually
providing Support Services to EIL/WWIL. Being the service
providers and BSS being taxable, the appellants were liable to pay
service tax on the amount received from EIL/WWIL. Hence the
demand is rightly confirmed.
5.3 With these submissions, the learned Departmental
Representative impressed upon no infirmity in the impugned order
under challenge and the appeal is prayed to be dismissed.
6. Having heard rival contentions of the parties, perusing the
entire record and the decisions relied upon by both the parties, we
observe that to adjudicate the present appeals the issue to be
adjudicated is:
(i) whether the appellants while transferring
allotment/approvals, acquired by them for a long as a result
of several activities undertaken to check the viability of
setting up wind farm on the said land, vide agreements
dated 22.09.2010 and 11.03.2011, respectively to
EIL/WWIL. The manufacture of WTF's for setting up of a
wind farm project were providing 'Business Support
Services' to the said EIL/WWIL as is alleged by the
15
department or the said transfer amounts to the sale of
Developmental Rights which are benefits arising out of
immovable property which is excluded from the definition of
service, as is claimed by the appellant.
6.1 To adjudicate the said issue foremost we have to peruse the
respective concepts i.e. the definition of „Business Support Service‟,
the definition of „Service‟; along with the meaning of consideration
and the meaning of „Development Rights‟.
Section 65B(49)of Finance Act, 1994 defines „Business Support
Service‟ as follows:
"Support Services of Business or Commerce" means
services provided in relation to business or
commerce and includes evaluation of prospective
customers, telemarketing, processing of purchase
orders and fulfilment services, information and
tracking of delivery schedules, managing
distribution and logistics, customer relationship
management services, accounting and processing of
transactions, operational assistance for marketing,
formulation of customer service and pricing policies,
infrastructural support services and other
transaction processing
Explanation -For the purposes of this clause, the
expression "infrastructural support services"
includes providing office along with office utilities,
lounge, reception with competent personnel to
handle messages, secretarial services, internet and
telecom facilities, pantry and security;"
Section 65(104c) of the Finance Act, 1994) "Taxable
Service" to:
means any service provided or to be provided to
any person, by any other person, in relation to
support services of business or commerce, in any
manner;
6.2 The definition was expanded in the Finance Act, 2012, to
encompass a broader range of services. Support services provided
by government or local authorities to business entities are excluded
from the negative list under section 66D. The new definition may
16
be divided into two parts i.e., one is the main part and the other is
the inclusive part. The first part of the definition is -
"infrastructural, operational, administrative, logistic,
marketing or any other support of any kind comprising functions
that entities carry out in ordinary course of operations themselves
but may obtain as services by outsourcing from others for any
reason whatsoever"
and the second part is-
"shall include advertisement and promotion, construction or works
contract, renting of immovable property, security, testing and
analysis".
6.3 The list of services mentioned in this provision clearly
indicates that the activities in support of business of client are
actually outsourced services. The CBEC vide Circular No.
109/3/2009-ST dated 23.02.2009 further clarified that „Business
Support Service‟ is a generic service of providing support to the
business or commerce of the service receiver. In other words, the
principal activity is to be undertaken by the recipient while the
service received is to support the business or commerce of the said
recipient.
6.4 Term „Service‟ is defined under Section 64B(44) of the Act as
follows.:
"Section 65B(44) „service‟ means any activity carried
out by a person for another for consideration and includes a
declared service but shall not include
(a) „any activity which constitutes merely :-
(i) A transfer of title in goods or immovable property by
way of sale, gift or in any other manner, or
17
(ii) such transfer delivery or supply of any goods which is
deemed to be a sale within the meaning of clause
(29A) of Article 366 of the Constitution or
(iii) a transaction in money or actionable claim.
6.5 Though the aforesaid definition clarifies that the immovable
property includes not only "land" but also the benefits" arising out of
land. We also observe that the benefits arising out of the land are also
immovable property by virtue of Section 3 (sub-section (26)) of the
General Clauses Act as submitted by the appellant. But we have also
perused that in Order-in-Original para A-3.14, thereof has discussed
about "benefits arising out of land" and it has been that title of land
also include transfer of benefits to arise out of land. However, these
benefits include the crops to be cultivated on the land, the trees that
might be growing on the land, the fish that may be thriving on a pond
that might exist on the land. The right to land includes all the above
benefits arising out of land. The Order-in-Original in para a. 3-18, it has
been further observed that:
"The term benefit to arise out of land is therefore
to be restricted to those which directly arise out of land
and are endemic to land."
To adjudicate the correctness of these findings the question arises
whether transfer of development rights is a benefit arising out of land so
as to fall under the meaning of "immovable property". As mentioned by
learned counsel for the appellant that the said issue has been
examined by the Hon'ble Bombay High Court in the case of Chheda
18
Housing Development Corporation v. Bibijan Shaikh Farid
(supra). However, we observe that the decision is with respect to
Transferable Developmental Rights. The Hon‟ble Court held as
under:
"15 The question is whether on account of the term in
the clause which permits acquisition of slum Transferred
Developmental Rights the appellants so far as the
additional FSI is concerned are not entitled for an
injunction to that extent. An immovable property under
the General Clauses Act 1897 under Section 3(26) has
been defined as under"
(26) inmovable property' shall include land,
benefits to arise out of land, and things attached to the
earth, or permanently fastened to anything attached to
the earth". If, therefore, any benefit arises out of the
land, then it is immovable property. Considering Section
10 of the Specific Relief Act, such a benefit can be
specifically enforced unless the respondents establish the
compensation in money would be an adequate relief.
Can FSI/TDR be said to be a benefit arising from the
land Before answering that issue we may refer to some
judgments for that purpose in Sikandar and Ors v
Bahadur and Ors 27 ILR 462 a Division Bench of the
Allahabad High Court held that right to collect market
dues upon a given piece of land is a benefit arising out of
land within the meaning of Section 3 of the India
Registration Act, 1877. A lease, therefore, of such right
for a period of more than one year must be made by
registered instrument. A Division Bench of the Oudh
High Court in Ram Jawan and Anr v Flanuman
Prasad and Ors AIR 1940 Oud 409 also held that
bazaar dues constitute a benefit arising out of the land
and therefore a lease of bazaar dues is a lease of
immovable Allahabad High Court in Smt Dropad1 Devi
v Ram Das and Ors MANU/UP/O120/1974,
AIR1974All473 on a consideration of Section 3(26) of
General Clauses Act. From these judgments what
appears is that a benefit arising from the land is
immovable property FSI/TDR being a benefit arising from
the land, consequently must be held to be immovable
property and an Agreement for use of TDR Consequently
can be specifically enforced, unless it is established that
.................
7. The Delhi Bench in DLF Commercial Projects Corporations (supra) held that the authorization given to a Developer" to develop the land and sell super-structure in perpetuity shall undisputedly fall within the words "benefit arising out of the land"
and shall therefore, be held to be "immovable property'. Once 19 there is a transaction in relation to immovable property, that shall, undisputedly, fall outside the purview of Service" within the meaning of Section 65B(44) and consequently. no Service Tax shall be payable under Section 66. It is also observed that when a company who owns the land or to whom the land is allotted, transfers the same for being developed to a developer, the transfer amounts to the transfer of land development rights to the developer for consideration.
The word „benefit; arising out of land, has also been interpreted in the following judgments:
(i) Shantabai Vs. State of Bombay 11 - It was held that right to entry upon the lands in order to cut down certain kinds of wood and to carry away the word is the benefit arising out of immovable property;
(ii) Ananda Behera vs. State of Orissa12 - Where lake has been held to be the immovable property and right to catch carry away fish therefrom is held to be benefit arising out of immovable property being 'profit a prendre';
(iii) State of Orissa Vs. Titagarh Paper Mills Company Limited13 -
Hon'ble Supreme Court held that an an agreement allowing, falling, willing, obtaining and removing bamboos from forest area for manufacture of paper is a benefit to arise out of land being an interest in immovable property. 11 AIR 1958 SC 542 12 AIR 1956 SC 17 13 1996 (9) SCC 516 20 However the agreement cannot be called as contract for sale.
8. From the above decisions, it stands clear that Development rights refer to the ownership and possession rights of the landowners developed with respect to a particular immovable property including the „profit a prendre‟ which includes the right to get their property, including the ability to construct buildings, alter existing structures, or change the use of the land. These rights are often regulated by local zoning laws and building codes, which dictate what can be built and how. Thus the development rights can be understood to mean in context of following:
1. Ownership and Regulation:
• Development rights are inherent to land ownership, meaning the owner has the primary authority to decide how the property is developed.
• However, these rights are not absolute and are subject to regulations set by local governments.
• Zoning laws, building codes, and environmental regulations all play a role in shaping how land can be developed.
2. Transferable Development Rights (TDR):
• TDR allows landowners to separate their development rights from their land and sell them to other land owners. • This can be a way to protect environmentally sensitive areas or historic landmarks while still allowing for growth in other areas.21
• For example, a landowner in a historic district might sell their development rights to a developer in a different area, allowing the developer to build at a higher density than zoning would normally permit.
3. Examples of Development Rights can be as follows:
• FAR (Floor Area Ratio): Determines the maximum building size relative to the land area. • Setbacks: Define the distance buildings must be from property lines.
• Height restrictions: Limit the maximum height of buildings.
• Density: Regulates the number of units or people that can occupy a particular area.
• Land Use: Specifies the type of activities permitted on the land (residential, commercial, industrial, etc.).
4. Purpose of Development Rights:
• Development rights are crucial for urban planning and managing growth.
• They allow for flexibility in development while protecting valuable resources and community character. • Understanding development rights is essential for both landowners and developers to make informed decisions about land use.
8.1 From the entire above discussion it stands clear that Development rights has to be the permission simpliciter to get entire on land either to get „profit a prendre‟ or to get a right to develop the land including the allotment and approval simpliciter with reference to land in case it was not owned or possessed by the person desirous of getting it developed. The Development Rights 22 cannot be sold except rights are those which are known as Transferable Development Rights (TDR).
9. We now revert to the facts of the present case. Following are observed as the admitted facts:
(i) Both the appellants VWILLP and JNITPL are the companies floated by the parent company EIL/WWIL.
Thus the appellants admittedly are the part of same group companies of EIL/WWIL.
(ii) The appellants are engaged in the business of development of infrastructure facilities for setting up of Wind Energy Projects by acquiring, purchasing, selling or otherwise dealing in approvals/allotments for Wind Power Projects, after undertaking several activities like identification of potential wind side, acquiring for Wind Power Projects etc.
(iii) VWILLP was granted exclusive Rights under the State Government‟s Wind Power Policy through Government orders with respect to ear-marked areas for (a) development and (b) setting up of wind power projects;
(iv) EIL/WWIL is engaged in manufacture of Wind Turbine Generations and in Installation and Commissioning thereof by providing complete end to end solution and services to their customers. The unrelated third parties for setting up of the Wind Mill/wind farm projects for them on turnkey basis i.e. they were entering into composite contracts for setting up of the wind farm project as a complete package with other parties. 23
(v) The transaction under dispute is between the VWILLP and JNITPL with EIL/WWIL pursuant to the agreements dated 22.9.2010 and 11.03.2011 respectively which are Agreements for Transfer of Project Approvals and Allotments.
(vi) The amount of consideration for the said agreements is
mentioned as „Purchase Consideration‟ in those
agreements and is recorded as „Sale of
Allotment/Approvals‟ in the financial statements of the appellants;
(vii) The agreement coins the approvals as "developer permission".
From the above admissions on record it becomes clear that the appellants are incorporated by EIL/WWIL to do some of such activities as were undertaken by EIL/WWIL to be done for their customers. Precisely the preparatory work for enabling EIL/WWIL to erect and commission the Wind Farms has been done by appellants. This observations gets support from the fact that EIL/WWIL while entering into the agreements with third parties for developing and setting up wind farms for them has agreed to obtain requisite approvals and allotments. One of such agreement of EIL/WWIL with M/s Tadas Wind Energy Pvt. Ltd is seen. It is observed that EIL/WWIL had agreed for land to be arranged with land boundary markings by them. Also the 100% of the price for transfer of development rights was received by EIL/WWIL in advance from the said third party. Following 24 permissions/ clearances were agreed to be obtained by EIL and to be submitted to relevant authorities & customers:
(1) Allotment of capacity from State Govt. / Nodal Agency; (2) NOC / clearance from Nodal Agency / SEB; (3) Evaluation Approval from SEB (4) Government Land Document as Applicable
a) Lease Deed / Sub Lease Deed (5) Approval of Construction Drawings from CEIG; (6) Safety Certificate from CEIG;
(7) Signing of PPA or Wheeling & Banking Agreement or Third Party Sale Agreement with SEB (8) Comnissioning Certificate from SEB Nodal Agency"
10. We further observe that procedure for obtaining these approvals has been elaborated in the Valuation Analysis Report dated 19.09.2010 in respect of 1333.06 MW of Development Rights given by Morison Bairagra Consulting Limited. It was undertaken by the appellants as per the valuation report, the details of DRs are as below:
"Before we proceed with the valuation analysis it is important to highlight the nature of these rights, process of obtaining these rights and its use in the business of energy generation.
Wind Turbine Generators (WTG) are currently setup onshore in India. The owner of the WTG would need some degree of assurance that the WTG will generate a desired output which will make economic sense for setting up the WTG. Based on this need, experts on the field of Wind Energy locate such areas, study the wind pattern over a period of time (generally 1-3 years), evaluate the pros and cons of the site in terms of topography, geography, soil condition, evacuation lines for transmission generated and others.
Due to the existing regulations, the areas which these WTG's can be setup need to be approved by the 25 Government / Regulatory Authorities. This is due to the fact that the area in which these WIG's can be setup is dependent on the respective authorities development plan for that area, the need for energy in that area, prevailing infrastructure for evacuation of the energy and many other factors.
Therefore, a development right for a wind farm site is the right to develop a wind farm at a particular site. Once an entity acquires a development right for a particular site, only that entity or its assignee or the transferee of these rights has the right to setup a WTG in that area. A development right for wind farm for a particular site is achieved on successfully discovering a potential wind power project at a particular site, by assessing wind speeds and estimated energy generation, known as Wind Monitoring, followed by obtaining the required approvals from the Government / Regulatory Authority."
Further the process cycle for obtaining such development rights for wind farm sites has been elaborated by those consultants in the said Valuation report as below:
Concept Stage Identification Identification of site based on wind pattern studies sourced from various agencies Approval If studies are favorable, obtain approvals for further wind energy potential studies Wind Monitoring Wind Mast Installation Once approval is received, Wind Masts are installed to study the wind patterns over a period of time Wind Profile Based on the above, Measurement reports are drawn out Micro-siting and Energy Includes site plan, direction Prognosis analysis, placements of WTG etc. Project Development Contour and Plain Table Includes Topography, Survey Geography, Soil studies Project Feasibility Based on legal, commercial, financial grounds 26 Approval Project Allotment MoU with respective State Government/Allotment from State Nodal Agencies Land Acquisition Either Outright Purchase or Lease of Private/Revenue/Forest land Evacuation Allotment Provided to the company by the State Electricity Board for grid connectivity of the power generated.
11. Perusal of this report and the agreement of EIL/WWIL with third parties for setting up wind farms for them clearly establishes that procuring of allotment and approvals. The so called Development Rights was agreed to be the responsibility of EIL/WWIL. However, admittedly those got procured by the appellants which were not in the nature of approvals and allotments simpliciter but were the outcome of several activities to procure the allotment and approvals (as recorded above), which were undertaken by the appellants to be utilized by EIL/WWIL. Hence the act of the appellant cannot be called as Development Right in the same sense as has been dealt with in DLF (supra) decision, relied upon by the appellants or it can be called as „benefit arising out of land‟ as dealt with by Hon‟ble Supreme Court in decision above.
EIL/WVIL had otherwise agreed with its customers that it shall procure the allotment and approvals i.e. it shall undertake all those activities without which approvals could be granted. 11.1 The arrangement under question is for outsourcing these activities to the appellants. It is wrongly nomenclated as agreement to transfer Approvals and Allotments also. EIL/WWIL 27 had received the same amount of money from its customers/third parties as is mentioned as „Purchase Money‟ in the agreements entered between appellants and EIL/WWIL dated 22.09.2010 & 11.03.2011. It is also an admitted fact that said purchase month was the debit note given to the appellants of the said amount. Thus demand of service tax has rightly been confirmed.
12. The Valuation Report has been considered by the original adjudicating authority as the basis of confirmation of impugned demand. Following conclusions of the said report are also observed:
"From the above, it can be seen that EIL were having the facilities for manufacture of wind turbines and VWIL were having the required experience and infrastructure for setting up the wind farms. It appears that VWIL were acting on behalf of EIL to facilitate them by creating the infrastructure and providing the necessary support and assistance by completing the necessary formalities and obtaining the required approvals and permission from the various Government/State Nodal authorities for setting up of wind farm."
13. It becomes evidence that though the application for setting up of wind farm of capacity 159.2 MW was made by VWIL to RREC but the funding for the same was provided by EIL/WWIL. This goes to show that VWIL were acting on behalf of EIL/WWIL while making the application for setting up of the 159.2. MW wind farm project.
14. From the project summary information and other documents in respect of the wind farm project in Gujarat it can be seen that EIL was the Developer of the project and some of the approvals for the project including approval for forest land were obtained by EIL. However, the approval for diversion of reserve forest land was obtained from the Ministry of Environment and Forest, New Delhi by VWIL on behalf of EIL. It is also apparent on record that while 28 entering into MoU with NEDCAP, VWILLP were not acting on their own but were acting on behalf of their various Group Companies, including EIL/WWIL, who had authorized VWILLP for preparation and submitting of the investment proposal and to sign and implement the MoU with NEDCAP on their behalf. This shows that VWILLP were acting as a facilitating agency for its Group Companies (EIL/WWIL and other Group Companies of Enercon Group) and were providing the above mentioned services to them for establishing wind energy measurement stations for obtaining wind data.
15. Above all the Developer Permissions granted to the appellants by the governmental nodal agencies were not transferable to any other entity or other developer, as has stated by Sh. S. B. Patil, Deputy Director of M/s Gujrat Energy Development Agency, Gandhinagar, Gujrat and also by Engineer (R&C) of M/s Gujrat Energy Transmission Corporation. It was also stated that it could only the capacity granted under the Developer Permission which was transferable that too to a client of the developer only on submission of an application in prescribed format. Appellant could not deny the said statements nor could produce any evidence to prove that permission was obtained for transferring the developer permission (Approvals and Allotments). Resultantly the agreements executed by the appellants for transfer of Developer Permission / approvals and allotments is the one prohibited under relevant law hence is void. Otherwise also the nomenclature of the document does not define the document, it is rather the content therein. We draw our support from the decision of Hon‟ble Rajasthan High Court 29 in the case of Shanti Devi Vs. Nand Lal14 wherein it has been held that the nomenclature of the document would not be the decisive factor. Document should be read as a whole and it is the substance of the document that matter and not the Farm. Hence much important cannot be adjudged in the nomenclature. The appellants agreements when read along with the said Valuation report it stands clear beyond all reasonable doubts that what has been transferred by the appellants under the said agreements to EIL/WWIL is not merely the approvals and allotments required to set up the wind farms but the whole set of underlying activities undertaken by the appellants to obtain those approvals and allotments. The approvals and allotments so obtained are not 'profit a prendre' hence cannot be called as benefit arising out of immovable property. Appellants are rightly held to have rendered the Business Support Services to EIL/WWIL.
16. The act of appellants is held to be an intentional act of hiding true colour of the transaction between the service provider (VWILLP) and the recipient of such services (EIL). This appears to have been done with intent to misguide the government authorities for the purpose of avoiding scrutiny of the transactions and to evade Service Tax payable thereon, support services of business & commerce being taxable services, the agreement are held to be the act done by VWILLP/JNITC in connivance with EIL/WWIL to suppress the true nature of services provided. Hence it is held that 14 AIR 2005 Raj. 1249 30 extended period of limitation has rightly been invoked while issuing the impugned show cause notice.
17. The appellants have taken the additional plea of them being the joint venture and their activity being self supply. But it is held that in cases of JVs the liability to tax depends on whether the JV is treated as a separate entity or are created to undertake transactions that occur between members. In the present case the transaction agreed by EIL/WWIL for its customers include the transaction undertaken by the appellants. This fact corroborates that the appellants had undertaken transactions on behalf of EIL/WWIL.
18. In the light of entire above discussion, we find no infirmity in the order under challenge when the invocation of extended period has been justified and the demand of service has been confirmed holding that appellants have rendered Business Support Services to EIL/WWIL. We therefore uphold the order. Consequent thereto both the appeals are hereby dismissed.
(Pronounced in open Court on 11/07/2025) (Dr. Rachna Gupta) Member (Judicial) (P.V. Subba Rao) Member (Technical) RM