Custom, Excise & Service Tax Tribunal
Chhattisgarh Mall Management Limited vs Raipur on 16 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 4
Service Tax Appeal No. 50754 of 2019
(Arising out of Order-in-Appeal No. BHO-EXCUS-002-APP-457-18-19 dated
30.11.2018 passed by the Commissioner (Appeals), CGST & Central Excise,
Raipur)
Chhattisgarh Mall Management Limited Appellant
Basement of Chhattisgarh City Centre,
Mall-Cum-Multiplex,
Khasra No. 515, 117/2 Devendranagar,
Pandri, Raipur (CG)
Versus
The Commissioner of Central Excise, Customs Respondent
& Central Excise, Raipur Central Excise Building, Dhamtari Road, Tikrapara, Raipur, Chhattisgarh-492001 Appearance:
Present for the Appellant: Shri P.V. Sadavarte, Advocate Present for the Respondent: Shri Anand Narayan, Authorized Representative CORAM:
Hon‟ble Dr. Rachna Gupta, Member (Judicial) Hon‟ble Mr. P.V. Subba Rao, Member (Technical) Date of Hearing : 24/03/2025 Date of Decision : 16/07/2025 Final Order No. 51020/2025 Dr. Rachna Gupta:
M/s Chhattisgarh Mall Management Ltd.1, the appellant herein, are registered with Service Tax Department being engaged in providing services of Renting of immovable property falling under 1 CMML 2 ST/50754/2019 sub clause 66E(a) and Business Auxiliary Services falling under sub clause of Section 65 (105 zzb) of the Finance Act 1994.
2. The Chhattisgarh City Centre Mall Cum Multiplex, Pandri, Raipur, the Project, was constructed and developed by M/s Gupta Infrastructure (India) Pvt. Ltd.2, Raipur on the leasehold land owned and occupied by Raipur Development Authority3 under an agreement dated 11th November 2005 (hereinafter referred to as the said agreement). The project was awarded by RDA to GIPL and its development was to be on the basis of „Build, Own Operate and Transfer‟4 during the project period. The department observed that as per the condition mentioned in article 6 of the said agreement, the Developer (GIPL) was made responsible for the operation and maintenance of the project and all the utilities, facilities and amenities including sewerage, sanitation, electricity and water connection, other civic amenities and obtaining necessary permission from appropriate authorities for the same initially and till the completion of the project, personally. It was also agreed that after the completion of project construction and execution of lease deed, the above functions of operation and maintenance of the project facilities shall be discharged by the developer but through a separate corporate entity i.e. Special Purpose Vehicle (SPV) to be constituted by the Developer (GIPL) with the participation in its Board of Directors such that the total No. of Directors should not be more than 8 at any point of time. These directors were agreed to be the representative of the commercial
2 GIPL 3 RDA 4 BOOT 3 ST/50754/2019 user (not more than 4 in Numbers) and Representative of the Developer (one in number), also of RDA (Two in Number) and the State Govt. Representation (One in Number). 2.1 In pursuance of the above objects, M/s Chhattisgarh Mall Management Limited (CMML) was constituted under the Companies Act 1956 as a „SPV‟ of GIPL, as per the Memorandum of Association. It was also agreed that the Developer shall also ensure that a minimum amount of Rs. 2000/- per Sq. Mtr. out of the money/ lease proceeds collected by the Developer from the Project Users shall be transferred to the said entity for utilization in discharging its functions towards operation, repairs and maintenance of the Project. The RDA on its part shall annually make available tó the said entity an amount equal to 25% of the Annual Ground rent collected by it from the Developer. 2.2 Department also relied upon the last para of article 3 of the said agreement dated 11.11.2005 according to which in consideration of the grant of the license by RDA, the Developer ensured the earmarking of at least 4000 Sq.mtr. of the total built up area of the Project, to be allotted in favour of the RDA. Each individual area to be so earmarked in favour of RDA was agreed to not to be less than 1000 sq. Mtrs. in any building block (as may be mutually agreed) in a vertical area division on any floor (not including any area of basement) to be called as „RDA Area‟ for the ownership and use of RDA. The said 4000 sq. mtrs area to be so earmarked and to be subsequently transferred to RDA was agreed 4 ST/50754/2019 to be the part of the consideration of the project in addition to the license fee payable to the RDA by the developer. 2.3 From the combined reading of said article 3 and article 6 of the agreement dated 11.11.2005 between RDA and the Developer, the department formed the opinion that the RDA had to pay Rs. 66,63,329/- (25% of Rs.2,66,53,315/-, the Ground Rent) annually to the Appellant in lieu of operation and maintenance of the 4000 square meter of area which was to be earmarked and transferred to the RDA by M/s GIIPL.
2.4 It was also observed that the Appellant has shown receipt of Rs. 66,63,329/- every year in their Profit and Loss account under the head „Operation and Maintenance Income‟. On further verification, Appellant was found receiving income of Rs. 66,63,329/- per year from RDA for providing taxable services. But since the Appellant did not provide any document specifying the exact nature of services rendered to RDA, department formed the opinion that the appellant has rendered the same set of services to RDA as enumerated in para 5 of the Show Cause Notice as that of Operation and Maintenance of Mall Project Premises. These services rendered by the Appellant to RDA have been alleged to fall under the category of "Business Auxiliary Services" as defined under erstwhile Section 65(105)(zzb) of Finance Act 1994. 2.5 The Appellant is a regular Service tax assessee and they are self-assessing and paying service tax on regular intervals under the head „Business Auxiliary Service‟ with respect to the amount they were receiving from the other commercial users of the 5 ST/50754/2019 Mall/Multiplex. Department alleged that the appellants were similarly required to pay service tax on the income received from RDA, being received for rendering for „Business Auxiliary Services‟ to RDA. But neither the tax has been paid nor the income has been shown in the said returns.
2.6 Based on these observations that the show cause notice no. 66/2016-17 dated 11.02.2017 was served upon the appellants invoking the extended period of limitation proposing the recovery of service tax amounting to Rs. 41,23,267/- along with the proportionate interest and the appropriate penalties. The proposal was initially confirmed vide Order- in-Original no. 21/2017-18 dated 28.03.2018. The appeal against the said order has been rejected by Commissioner (Appeals) vide Order- in-Appeal no. 131/2018/6339 dated 30.11.2018. Being aggrieved of the said order, the appellant is before this tribunal.
3. We have heard Shri P. V. Sadavarte, learned counsel for the appellant and Shri Anand Narayan, learned Authorized Representative (AR) appearing for the respondent-department.
4. Learned counsel for the appellant has submitted that Chhattisgarh Mall Management Limited (hereinafter called as "CMML") is being formed to monitor, pursue and to comply with the provisions of the "Chhattisgarh Prakoshtha Swamita Adhiniyam, 1976" for management of common areas and facilities of Chhattisgarh City Centre Mall Cum Multiplex and accordingly the main object of the Company is as mentioned in Article 6 of the Agreement dated 11.11.2005. The SPV was created 6 ST/50754/2019 to financially and managerially be liable to execute the various objects including:
(i) Civic amenities including Roads, parks, Parking lots, Common lighting and general housekeeping etc;
(ii) General Repairs and Maintenance of the Project;
(iii) Security and public announcement system;
(iv) Electricity and water supply and payments thereof;
(v) Sanitary and sewage system including cleaning of the project premises and collection and proper disposal of garbage;
(vi) Fire fighting system; (vii) Repair and maintenance of Elevators and escalators; (viii) Maintenance of Terrace: (ix) Any other facilities of common concern of the project users, visitors and the local authorities.
The above list of objects of the SPV is only indicative and shall under no circumstance be limiting to cater to the needs of the common concern of the project users, visitors and local authorities 4.1 RDA, being desirous of establishing the Project on the Project Land, with the requisite infrastructure facilities for the purpose of meeting the existing and projected business and commercial needs of Raipur, invited bids. The Tender dated 07.10.2005 was floated for grant of development and leasehold rights of the Project Land in favour of M/s Gupta Infrastructure (India) Pvt. Ltd. (M/s GIPL) has submitted its bid for a total licence fees of Rs. 41,00,51,000.00/-.
The agreement dated 11.11.2005, was executed for the development of the project on a Build, Own, Operate and 7 ST/50754/2019 Transfer (BOOT) during the Project period on the terms and conditions of this Agreement.
4.2 Based on these broad submissions, Ld. Counsel for appellant further elaborated the submissions as follows: -
Income for Parent Company Not Taxable:
The income received from M/s GIPL, the parent company of the appellant for maintaining the mall is denied to be taxable income under the Finance Act, 1994. The appellant has already paid service tax on amounts collected from customers for services rendered to them. Therefore, the income from its parent company, which is a sharing of income and not a payment for services, should not be taxed under the category of Business Auxiliary Services Lack of Evidence:
The show cause notice assumed that the income shown in the profit and loss account is from Business Auxiliary Services but has failed to provide evidence to support this assumption. The income was otherwise shown as receivable.
Function of Special Purpose Vehicle (SPV): The primary purpose of appellant, as an SPV, wason behalf of M/s GIPL, to operate and maintain the facilities of Chhattisgarh City Centre Mall-Cum-Multiplex, including common areas, roads, parks, sanitation, etc. Since the appellant company merely acted as a conduit for managing these facilities, it is wrongly alleged that taxable services under the Finance Act, 1994 have been rendered by the appellants. Also, the amount to be received from RDA is not the income towards a taxable service but a contribution toward maintaining the mall.
Non-Receipt of Contribution:
The appellant claims that the contribution of Rs. 66,63,329/- as was to be received annually from RDA, as stipulated in the agreement dated 11.11.2005, has never been received during the period of dispute (2011-12 to 2015-16) not even for year 2016-17. Since the contribution was not received, there is no consideration hence no such service transaction on which service tax could be levied.
No Intent to Evade Tax:
The appellant emphasized that it did not intend to evade service tax. The books of accounts have been maintained in compliance with accounting standards, and the amounts from RDA were 8 ST/50754/2019 disclosed as receivables in the balance sheets and in profit & loss accounts as the said amounts were never received. Hence the extended period has wrongly been invoked while issuing the show cause notice.
4.3 Learned Counsel finally relied upon the Circular No. 152/3/2012-S.T., which clarifies that service tax is not to be levied on tolls collected by SPVs in PPP models under the Build-Own-
Operate-Transfer (BOOT) arrangement. It is impressed upon that the situation is analogous, and since the appellant was merely acting as a conduit to receive contributions for the maintenance of the mall, no service tax should apply to the amounts received from RDA. Based on these submissions the order under challenge confirming the demand of service tax with interest and penalties is prayed to be set aside and the appeal is prayed to be allowed.
5. To rebut the submissions of the appellants, Learned Authorized Representative appearing for the department submitted that the appellant company (SPV) was specifically created to handle the operation and maintenance of the mall, and same services were provided to RDA as part of its core function. As apparent from the agreement between RDA and the developer, the SPV was obligated to provide maintenance and operation services for the area earmarked for RDA. These services were not exempted nor are covered under the negative list of section 66D of the Finance act, 1994, thus were subject to service tax. The adjudicating authority has confirmed the service tax demand of Rs. 41,23,267/- along with interest and penalty on the ground that the amount as mentioned in article 6 of the agreement dated 11.11.2005, i.e. Rs. 66,63,329/- was indeed for the provision of taxable services, and 9 ST/50754/2019 as such, was subject to service tax under Section 66B of the Finance Act. Thus, the findings of O-I-O are impressed to be correct and sustainable.
5.1 Learned Authorized Representative also relied upon Point of Taxation Rules, 2011. As per Rule 2A thereof, "date of payment"
has to be the earliest of the dates on which the payment is entered in the books of accounts or is credited to the bank account of the person liable to pay tax. With these submissions and impressing upon no infirmity in the Order-in-Appeal under challenge, the appeal is prayed to be dismissed.
6. Having heard both the parties, the rival contentions and from the perusal of the records of the appeal memo, it is observed that the Raipur Development Authority (RDA), the alleged service recipient is a statutory body under Government of Chhattisgarh. The said authority being the owner of certain lands and with the idea of development of Mall and other related activities there upon for public purpose under the mandate of the statute Chhattisgarh Nagar Tatha Gram Nivesh Adhiniyam, 1973 had floated a tender and entered into an agreement dated 11.11.2005 with M/s Gupta Infrastructure Limited, (GIPL). The said developer, being the highest bidder was awarded for project. The demand has been raised on the basis of terms and conditions of the said agreement. Following are observed to be the key conditions of the said agreement: -
Developer to pay RDA a licence fee of Rs. 41,00,51,000/- for acquiring leasehold rights of the project land measuring 10 ST/50754/2019 44000 Sq. ft. of the leased area however, on BOOT basis i.e. Build, Own, Operate and transfer.
Developer to hand over 4000 sq. mtr built-up area to RDA as part of the project cost / license fee to be earmarked on each floor a specific area of not more than 1000 Sq. mts. Each floor. (consideration in kind) Developer to pay annual ground rent of Rs. 2,66,53,315/ - along with applicable service tax pursuant to lease deed for 30 years to be executed after completion of project. The project got completed on 30.03.2010. The lease could be renewed for two more spells of 30 years each amounting to perpetual lease.
Developer to undertake operation and maintenance (O&M) during construction of project.
Upon project completion, Developer and RDA to jointly constitute a Special Purpose Vehicle (SPV) for undertaking the ongoing O&M activities as below, however, O&M was still made Developer‟s responsibility, :
1. Civic amenities including Roads, Parks, Parking lots, common lighting & general housekeeping etc.
2. General Repairs & Maintenance of the Project
3. Security & public announcement System
4. Electricity & Water supply and payments thereof
5. Sanitary & Sewerage System including cleaning of the Project premises and Collection and proper disposal of garbage
6. Fire fighting System
7. Repairs & Maintenance of the Elevators & Escalators
8. Maintenance of terrace
9. Any other facilities of common concern of the Project users, visitors and the local authorities
7. We also observe and hold that:
There is admittedly, no agreement between appellant and RDA. Hence no privity of contract between the two. The agreement dated 11.11.2025 on basis of which show cause 11 ST/50754/2019 notice has been issued is the agreement between Developer (GIPL) & RDA. The appellant was not in existence at the time of said agreement which talks about its creation but after the completion of project by Developer and to act on behalf of developer.
The agreement is between RDA, the owner of project land and Developer, M/s GIPL who acquired leasehold rights in extendable to 90 years w.r.t. the said land on BOOT full term also basis. Thus the transaction amounts to „Deemed Sale" in terms of article 366(29A) of the constitution of India.
The developer got rights to develop a Mall Project of several commercial units on the said project land and to sell those units to individual buyers.
The Developer only had undertaken the responsibility of O&M operations with respect to project land and the Project Mall. Till the completion of project, developer had to personally discharge the said responsibility and after the completion thereof, the said responsibility was to be undertaken by SPV, the appellant, but on behalf of the developer only. Thus appellant is none but the agent of the developer who had acquired the project land on ownership and operate basis.
The funding with SPV / appellant, the agent of developer for undertaking the O&M of Mall premises was to be contributed by Developer and RDA as mentioned in the last para of article 3 of the agreement dated 11.11.2005, (already quoted above).
Said Article 3 also talks about creation of an Escrow Account for the purpose. The para recites as follows:
Escrow Account "3.1.2.1 Further, to ensure payment of the balance License Fees in accordance with the Payment Schedule all amounts received by the Developer from the Project Users for the Commercial Units shall be, deposited in the Escrow Account to be established by the Parties with the Escrow Agent, being a Scheduled Commercial Bank. The amount deposited in the Escrow Account shall be dealt with as below:
(a) The amount deposited in the Escrow Account shall be shared equally between RDA and the Developer on a quarterly basis. The amounts received by RDA from the Escrow Account shall be adjusted towards the next Annual Installments payable by the Developer towards the License Fees in accordance with the Payment Schedule including the cost/ losses/ damages, if any, incurred by RDA on account of the Developer. In the event the amounts 12 ST/50754/2019 disbursed to the RDA from the accruals to the Escrow Account exceed the next due Annual Installment, the excess accruals so disbursed shall be adjusted against the Annual Installment due thereafter including the cost/ losses/ damages, if any, incurred by RDA on account of the Developer and also subject to the provisions of Article -9 of this agreement.
(b) The sharing of the amounts deposited in the Escrow Account shall stop only upon payment of the entire License Fees in accordance with the Payment Schedule.
3.1.2.2 The Parties will enter into the Escrow Agent in the form set out in Annexure - E hereto give effect to the arrangement set out above.
3.1.2.3 It is clarified that while the payment received by RDA from the sharing of the amounts deposited in the Escrow Account shall be adjusted against the Annual Installments payable in accordance with the Payment Schedule, the obligation of the Developer to make payments in accordance with the Payment Schedule is independent of the aforesaid sharing arrangement and will have to be met by the Developer irrespective of whether any amounts are credited/ deposited in the Escrow Account. Accordingly, in case the aggregate of RDA's share of quarterly receipts in a year do not equal the annual installments payable in accordance with the Payment Schedule the Developer shall be required to make good the shortfall. Further, in the event there is excess credit on the annual settlement of the amounts received by RDA from the Escrow AR Account, such excess shall be adjusted towards the next Annual installment, which remains unpaid, in accordance with the Payment Schedule."
There is no denial to the fact that developer‟s contribution to the said Escrow amount was @ Rs. 2000/- per commercial unit per month out of the rent (inclusive of maintenance charges) received from lesees of those units RDA contribution was 6.5% to be deposited annually out of the amount of lease rent The payment by RDA for sake of SPV since prior the formation of SPV can be nothing more than grant / aid for appellant to carry on its activities. The appellant admittedly was discharging service tax liability on the amount was being as received from commercial units monthly as payment towards O&M activities for their specific area.
No denial is on record about the fact that RDA area of 4000 Sq. Ft. was never got earmarked on the different floors of the Mall/ Project as mentioned in article 3. No question arises for providing same services to RDA as were being provided to the specifically ear marked areas of the commercial unit users.
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ST/50754/2019 There is also no denial to the submission of the appellant that RDA never deposited said amount to said Escrow account. Appellant has placed on record the Auditor‟s report dated 03.09.2016 certifying the same. The said report is admissible in evidence. We draw our support from the decision of Hon‟ble Supreme Court in the case of Union of India Vs. Mangal Textile Mills Private Limited5 has held that the certificate issued by the Chartered Accountant is required to be considered by the Authority as an authentic document. The said part of para 3 reads as follows:
"Further, in consideration of the grant of the License hereunder, the Developer shall ensure the earmarking of atleast 4000 Sq. Mtr. of the total built-up area of the Project, which shall be allotted in fayour of the RDA. Each individual area out of the earmarked area which is allotted in favour of RDA shall not be less than 1000 Sg. Mtr, in any building block (as may be mutually agreed) in a vertical area division on any floor (not including any area of basement) hereinafter called "RDA Area" for the ownership and use of RDA."
8. The above discussed conditions of the agreement dated 11.11.2005 clarifies that functions of operation and maintenance of the Project facilities even after completion of project were agreed to be discharged by the Developer only however through SPV from the funds pooled in by the developer itself and RDA. It is this advance annual income of Rs. 66,63,329/- which was to be received towards funds for appellant from RDA which is alleged to be an amount of consideration received by the appellant for rendering a taxable service defined under section 65 (b) 44 of Finance Act 1994. However, in show cause notice (para 12) the nature of the activity detailed in aforesaid article 6 is alleged to be that of business auxiliary service as defined under section 65 (105) (zzb) of Finance Act 1994. Apparently, the contents of para 12 of show cause notice are contradictory irrespective that the concept of classification service is not relevant w.e.f. Jul 2012 after the concept of negative list in section 66 D of Finance Act was incorporated. 5 2011 (269) ELT 3 (SC) 14 ST/50754/2019
9. In the light of above discussed observations and findings, the issue to be adjudicated is crystallized as follows: -
Whether the funds shared for appellant/SPA by the Developer and RDA both of whom agreed for the said Special Purpose Vehicle (SPV) to be constituted at a later stage, in terms of the agreement dated 11.11.2005, for carrying out O&M functions but on behalf of the developer, can be called as consideration for rendering a taxable service of nature of Business Auxiliary Service?
9.1 Foremost we have pursued the definition of „Service‟ in section 65 B (44) Finance Act 1944 its read as follows:
"Section [65B. Interpretations. - In this Chapter, unless he context otherwise requires, -
(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include -
(a) an 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
(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;
From this definition following elements emerge :
(i) SERVICE IS AN ACTIVITY FOR A CONSIDERATION:
9.2 The concept „activity for a consideration‟ involves an element of contractual relationship wherein the person doing an activity does so at the desire of the person for whom the activity is done in exchange for a consideration. An activity done without such a relationship i.e. without the express or implied contractual reciprocity of a consideration would not be an „activity for consideration‟ even though such an activity may lead to accrual of gains to the person carrying out the activity. Example An artist performing on a street does an activity without consideration even though passersby may drop some coins in his bowl kept after 15 ST/50754/2019 feeling either rejoiced or merely out of compassion. They are, however, under no obligation to pay any amount for listening to him nor have they engaged him for his services. On the other hand, if the same person is called to perform on payment of an amount of money, then the performance becomes an activity for a consideration.
Thus Consideration = Monetary + Non Monetary Hence to be called as service an activity has to be carried out for a consideration.
Consideration is defined under section 2(d) of contract Act to mean as follows: -
According to Section 2(d) of the Indian Contract Act, 1872, "when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise." In the following definition, a promissor is the party that performs a promise and a promisee is the party to which a promise is made.
The definition draws meaning from the Latin term "quid pro quo," which means "something for something." It states that each party entering into a contract should offer something to the other 16 ST/50754/2019 party. The definition clarifies that the Consideration Must Be at the Desire of the Promisor.
For consideration to be valid, it must be given at the promisor's request. In Durga Prasad v. Baldeo, the plaintiff constructed a market at the district collector's request, and shopkeepers later promised to pay him a commission. The court held that the contract was void because the plaintiff acted on the collector's request, not the shopkeepers‟, making the consideration invalid.
(ii) SERVICE HAS TO BE CARRIED OUT BY A PERSON FOR ANOTHER:
9.3 „provided by one person to another‟ signifies that services provided by a person to self are outside the ambit of taxable service. Example of such service would include a service provided by one branch of a company to another or to its head office or vice-
versa. There are two exemptions of this:- - an establishment of a person located in taxable territory and another establishment of such person located in non-taxable territory are treated as establishments of distinct persons. - an unincorporated association or body of persons and members thereof are also treated as distinct persons. Implications of these deeming provisions are that inter-se provision of services between such persons, deemed to be separate persons, would be taxable. For example, services provided by a club to its members and services provided by the branch office of a multinational company to the headquarters of the multi-national company located outside India would be taxable provided other conditions relating to taxability of service are satisfied. 17
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10. The above discussion establishes that for any activity to be called as taxable service there should be an element of contractual relationship between the service provider and service recipient with the specified activity / service to be rendered. As already observed above, the present case admittedly has arisen out of agreement dated11.11.2005 between RDA, the owner of a land and GIPL the developer of a project/Mall Complex, on the said land. Since there is no contractual relationship neither express nor even implied between RDA and SPV the very basis of the impugned activity to be called as service under section 66B(49) of the Finance Act is not existing. Further any activity to be a taxable service it should be an activity for a consideration, the quid pro quo amount between promiser and promisee which should emerge from contractual relationship (expressed or implied).
11. As already observed above, that the appellant has proved that no consideration has flown from RDA to SPV not even to the Escrow account as was created for the said purpose. Thus even contractual reciprocatory of the consideration is absent in the present case. Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient. 18
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12. Department had proceeded on the premise that the amount mentioned in article 6 of, the agreement dated 11.11.2025 in light of last para of article 3 is the consideration for rendering taxable service (BSS) to RDA. Both the articles are perused. Relevant para of the article reads as follow: -
Article-6 Operation & Maintenance of the Project "The Developer shall also be responsible initially and till the completion of the project for the operation & maintenance of the Project and all the utilities, facilities and amenities, including sewerage, sanitation, electricity and water connection, other civic amenities and obtaining necessary permissions from appropriate authorities for the same.
After this phase of project construction and execution of the lease deed, the above functions of operation and maintenance of the project facilities shall be discharged by the Developer through a separate corporate entity i.e. a Special Purpose Vehicle (SPV) to be Constituted by the Developer with participation in its Board of Directors (total number of Directors should not be more than 8 at any point of time) from the representatives of the Commercial Users (not being more than four in number) and representation from (A)-Developer (One in number), (B)- RDA (Two in number) and (C) -State Government representation (One in number). The constitutional and incorporation documents of the said entity shall be in the form acceptable to RDA except any modification in the representation/constitution of the Board of such entity, which shall remain as explained above. The Developer shall also ensure that a minimum amount of Rs. 2000/- per Sq. Mtr. Out of the money/ lease proceeds collected by the Developer from the Project Users shall be transferred to the said entity for utilization in discharging its functions towards operation, repairs and maintenance of the Project. The RDA on its part shall annually make available to the said entity an amount equal to 25% of the Annual Ground rent collected by it from the Developer."
Article-3 3.1 The Developer shall, in consideration for grant of the License, pay to RDA, the „License Fees as contemplated in this Agreement.
The Developer shall pay 30% of the License Fees at the time of execution of this Agreement. The amount of Rs. 50,00,000/- (Rupees Fifty Lakhs only) paid by the Developer as earnest money deposit along with the submission of its bid for the Project and the Project Land shall be adjusted against the aforesaid down payment of 19 ST/50754/2019 30% of the License Fees. The balance License Fees shall be payable in three (3) annual installments (Annual Installments") payable in accordance with the Payment Schedule. All payments towards the License Fees shall be paid vide bankers cheque/demand draft drawn in favour of the Raipur Development Authority payable at Raipur.
The Developer acknowledges that RDA has accepted the Tender of the Developer and allowed it to undertake the development of the Project on the Project Land on the assurance and covenant of the Developer for timely payment of the License Fees. The Developer therefore, agrees to secure the payment of the License Fees as follows:
3.1.1 Bank Guarantee The Developer shall obtain and maintain throughout the license period an irrevocable bank guarantee, as set out in Annexure - B, covering 30% of the License Fees of Rs.
12,30,15,300.00 (Rs. Twelve crores thirty lakhs fifteen thousand and three hundred only) which is valid for the entire License Period in favour of RDA. The terms of the Bank Guarantee shall provide that RDA shall be entitled to enforce the same in the event there is any default in payment of any Annual installment towards the License Fees in accordance with the Payment Schedule. It is clarified that in the event the Bank Guarantee is encashed by RDA pursuant to default in payment of the License Fees, in accordance with the Payment Schedule, the Developer shall provide a fresh Bank Guarantee for the balance installment of license fees remaining to be paid at that point of time including the cost/ losses/damages, if any, incurred by RDA due to such Encashment/devolution of the Bank Guarantee." From the article 6 of the agreement dated 11.11.2005, as reproduced above it is clear that SPV / appellant was agreed by RDA to be constituted by the developer after completion of project with participation in its board of director, 8 in number including one from the developer itself and two from the RDA, the parties to the agreement dated 11.11.2005. Thus, the SPV / appellant is nothing but the creation of public private partnership between Government (RDA) and private parties (the developer). There is no relationship between RDA & SPV as that of Promisor - Promisee. Hence there is no possibility of relationship of service provider - service recipient between the two.
Para 3.1.2.3 as already reproduced above corroborates that the amount to be paid by RDA was not quid pro quo for alleged taxable service. More so far the reason that RDA area was not got earmarked and the amount mentioned in article 6 was never received by the appellant (para 6.4 of the article as reproduced above)
13. It is also observed that while confirming the impugned demand the adjudicating authority below have invoked Rule 2A of 20 ST/50754/2019 Point of Taxation Rules 2011 (Para 6.11 of the order in appeal). The Rules reads as follows: -
"Date of Payment (Rule 2A): The new rule has been inserted for the purpose of setting out what is "date of payment". Accordingly, earlier of the following dates would be considered as date of payment i.e. Date on which the payment is entered in the books of account; or
(i) Date on which the payment is entered in the books of account; or
(ii) Date on which the payment is credited to the bank account of the person liable to pay tax Further the date of book entry would not be considered and only date of credit into bank account would be considered if all the three conditions below are fulfilled-
(i) Between the date of entry and date of credit, there is change in effective rate of tax or
(ii) when a service is taxed for the first time; and The credit in the bank account is after four working days from the said date of rate change or new levy;
The payment is made by way of an instrument which is credited to bank accounted. The above said principle would equally apply for determining the date of receipt as well." Amendment Rule has been inserted for the purpose of setting out what is "date of payment".
Accordingly, earliest of the following dates would be considered as date of payment i.e. Date on which the payment is entered in the books of account; or Date on which the payment is credited to the bank account of the person liable to pay tax.
14. The Point of Taxation in general is summed up as under:
Scenario Point of Taxation Invoice issued within 30 days Date of Invoice from the completion of service Service completed, but invoice Date of completion of Service 21 ST/50754/2019 not issued within 30 days Advance received before Date of receipt to the extent of completion advance received.
Invoice issued before completion Date of Invoice of service In case of continuous supply of Completion of respective events service as per the contract entered
15. However from the defence submission right from the stage of reply to show cause notice, the appellants stands is that no amount was ever received by the appellants from RDA and by the authority no invoice was ever issued. The amount as shown in the books is shown as receivable instated of being show as received. But the same has not been considered, while invoking the Point of Taxation Rules. There is no evidence on record to show that the invoice was ever issued by the Appellant to RDA, though the invoices were issued to the commercial users of the Mall and the service tax on the amount received from them already stands discharged by the developer. Nor there is any evidence that the amount in question was ever received by the appellant. On the contrary appellant has placed on the record, the chartered accountant certificate to certify that the annual amount of 66,63,329/- for the financial year from 2011-12 to 2015-16 (Rs. 3316645) though was receivable from RDA but was never paid and finally got written of in financial year 2021-22. The SCN is held to have wrongly recorded that the amount was received by the appellants from RDA. The SCN is liable to be rejected on this ground alone. The adjudicating authority is held to have wrongly ignored the relevant submissions.
16. From Article 6 of the agreement dated 11.11.2005, it is also clear that SPV / appellant was entrusted with operational and maintenance of the entire mall and not merely of the 4000 sq mtr 22 ST/50754/2019 area owned by RDA. The said 4000 sq mtr area apparently, never got earmarked. No document has been perused by the department to falsify the same. As already observed above there is no specific agreement for maintenance and operation of 4000 sq mtr executed between the appellant and RDA. These observations are sufficient to hold that there is no evidence on record about any of three events mentioned in Rule 2A and even Rule 3A of Point of Taxation Rules, 2011. It is accordingly held that the rule has wrongly been invoked.
17. Further we observe that there is department‟s own circular No. 35/9/2018-GST dated 5.3.2018.
18. Another major lacuna that has been overlooked by the adjudicating authority below is that the activities to be rendered by the developer through SPV were in the nature of Maintenance, Repairs and operations to the extent as specifically mentioned in the agreement (as noted above). Hence SCN should have proposed the same under Maintenance, Management and Repair Services (MMR) as defined under section 64. The show cause notice has proposed those activities B (O&M) as Business Auxiliary Services (BAS) as defined under section 65 (105 zzb) The said section reads as follows:
"(64) Management, maintenance or repair means any service provided by -
(i) Any person under a contract or an agreement; or
(ii) A manufacturer or any person authorized by him, in relation to, -
(a) maintenance or repair of properties, whether immovable or not; or
(b) maintenance or repair of properties, whether immovable or not; or 23 ST/50754/2019
(c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;
Explanation : For the removal of doubts, it is hereby declared that for the purposes of this clause, -
(a) "goods" includes computer software;
(b) "properties" includes information
technology software."
"Business Auxiliary Service" means any service in relation to, --
(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) (ii) promotion or marketing of service provided by the client;
or [****]
(iii) (iii) any customer care service provided on behalf of the client; or
(iv) procurement of goods or services, which are inputs for the client; or [Explanation.-- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;] [(v) production or processing of goods for, or on behalf of the client;
(v) provision of service on behalf of the client; or
(vi) a service incidental or auxiliary to any activity specified in sub-clauses
(i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, [but does not include any activity that amounts to "manufacture" of excisable goods."
24
ST/50754/2019 Perusal of both the definition are makes it clear that the activities mentioned in para 5 of the SCN cannot be categorized under BSS. Though after introduction of concept of negative list w.e.f. 01.07.2012 in the Finance Act, the concept of classification of service has got redundant but for the purpose of arriving at the assessable value or as to whether any exemption is available to the activity, the true nature of the activity has to be looked into. Since the department has wrongly mentioned the nature of impugned activities of operations and Management which are purely in nature of repairs and maintenance as BSS, the SCN itself is not sustainable. Confirmation of the proposal of such SCN is liable to be set aside.
19. Finally coming to the plea of limitation as has been raised for the appellant, we observe that the show cause notice dated 11.04.2017 covers period 2011-12 to 2015-16. Entire period is beyond the normal period of limitation. Appellants was admittedly disclosing all facts in financials records. The service tax with reference to the commercial uses of specific area for maintenance thereof was regularly been paid. No amount of consideration was received from RDA despite the agreement to contribute and the amount agreed between RDA and developer was duly show as receivables in appellant‟s record. There seems no act of alleged suppression on part of appellant were repeatedly been followed. The appellant rather was under bonafide belief (as submitted) that since no service is being render to RDA nor any money is received 25 ST/50754/2019 from RDA, there is no service tax liability of appellants vis-à-vis RDA. The department has failed to produce any evidence proving that appellant had intentionally evaded payment of service tax. The above discussion has already held that appellant was not liable to pay service tax on the amount mentioned in para 6 of the agreement dated 11.11.2025.
20. Resultantly, we hold that the extended period under Section 73(1) was not invocable, nor penalty was imposable. The SCN gets barred by time and the order under challenge is liable to be set aside.
21. As a result of entire above discussions, we hold that : -
(i) There was no service contract (expressed or implied) executed between the appellant and RDA for the specific 4000 sq ft. of the area which had fallen to RDA maintaining share as consideration in kind from M/s GIPL against transfer of leasehold right from RDA to GIPL on BOOT basis
(ii) The amount paid by the RDA was an advance annual payment, pursuant to agreement between RDA & M/s GIPL, hence, do not qualify to be called as an amount quid pro quo considerations given to SPV/appellants for rendering maintenance services.
(iii) The allegation in show cause notice (Para 12) are contradictory for the reason activities such as security, sanitation, fire safety, lighting, etc., fall under „Management, Maintenance or Repair Services‟, not BAS.
(iv) SCN held to be is the result of wrong interpretation of article 3 and 6 of the agreement dated 11.11.2005 between RDA & M/s GIPL executed.
(v) There is no evidence by the department to prove alleged suppression on part of the appellant. SCN is held to be barred by limitation.26
ST/50754/2019
22. Consequent to the entire discussion as above and the conclusion as above, the order under challenge is hereby set aside. Consequent thereto, the appeal is hereby allowed.
(Pronounced in open Court on 16.07.2025) (Dr. Rachna Gupta) Member (Judicial) (P.V. Subba Rao) Member (Technical) RM